Trader accused of manipulating commodity prices – ASSOPR
CHICAGO (AP) – A New Jersey high-frequency trader was accused of manipulating
commodity prices by sending false signals to the market and then executing
trades within milliseconds to make huge profits, prosecutors said Thursday, in
what they described as a first-of-its-kind prosecution.
Michael Coscia, 52, was indicted for illegally earning around $1.5 million
through the Chicago-based CME Group – the world’s largest operator of futures
exchanges – and European futures markets in 2011. The U.S. attorney’s office in
Chicago said it’s the first case under major changes to federal commodities law
in 2010, when Congress enacted the Dodd-Frank Wall Street reforms after the
High-frequency trading was the subject of Michael Lewis’ best-selling book
“Flash Boys,” which chronicled how Wall Street traders sought profits and a jump
on competitors through ever-faster computer systems down to fractions of a
second. Powerful computers analyze market information and then execute buy and
sell orders within milliseconds, or thousandths of a second. The practice has
come under increasing scrutiny, with the FBI confirming earlier this year that
it had been investigating such firms.
Critics argue that it can lead to wild swings in the market and unfair
advantages for companies with faster computers.
“Traders and investors deserve a level playing field,” U.S. Attorney for
Northern Illinois Zachary Fardon said in a statement announcing the indictment
by a grand jury in Chicago.
The 19-page document includes timelines broken into the precise milliseconds
Coscia allegedly executed each stage of the fraudulent trades. At 9:39 a.m. on
Sept. 2, 2011, for instance, he made $560 on gold futures in under a second
after artificially bumping up the market price with an order that he cancelled
within milliseconds, the indictment says. Coscia allegedly engaged in similar
trades hundreds of times, including for soybean oil and copper.
The goal was “to trick other traders into reacting to the false price and volume
information he created with his fraudulent and misleading quote orders” that
“appeared to represent a substantial change in the market,” the indictment
Coscia, a registered commodities trader since 1988, faces six counts each of
commodities fraud and “spoofing,” which refers to signaling that an order is
being placed without intending to follow through. If convicted, he could face
decades in prison.
His attorney, Richard T. Reibman, told The Associated Press that he is
“discussing the matter” with prosecutors. He declined further comment.
Coscia has come under scrutiny before. The Commodity Futures Trading Commission
last year accused him and his New Jersey trading firm, Panther Energy Trading,
of manipulating markets through allegedly placing orders that it never planned
on executing. The federal regulator fined the company $2.8 million for
“spoofing” trades and banned the firm from trading for one year. Panther Energy
Trading settled with the CFTC without admitting or denying the allegations.
High-frequency trading now accounts for a large percentage of U.S. stock
trading. But the practice began to come under intense public scrutiny following
the “flash crash” of May 6, 2010, when a glitch erased 600 points from the Dow
Jones industrial average in five minutes.
The CME Group owns the Chicago Mercantile Exchange, the Chicago Board of Trade,
the New York Mercantile Exchange and exchanges that trade futures on gold and
other metals, as well as agricultural products including cocoa, soybeans and
A spokesman for the CME Group in Chicago, Chris Grams, declined any comment on