CME suspends two gold futures traders

US futures exchange CME Group has suspended two traders based in the Middle East that it says colluded to use manipulative trading strategies similar to those alleged against a UK trader last week.

In a disciplinary notice issued late on Thursday, the Chicago exchange alleged that Heet Khara and Nasim Salim had been placing orders on its gold futures markets this year with no intention of trading. The two are based in the United Arab Emirates, according to a person close to the exchange.

The two traders knew each other and "on multiple occasions co-ordinated efforts to engage in disruptive activity", the CME alleged.

This activity, known as layering, shot to worldwide attention last week following the arrest by the US Department of Justice of UK-based Navinder Singh Sarao for alleged market manipulation. Mr Sarao has been accused of using layering, and another technique called spoofing, over a four-year period.

The CME came under scrutiny when it emerged that it had identified a high volume of cancelled orders by Mr Sarao as far back as 2009.

Although the exchange was aware of Mr Sarao, who has since been charged with contributing to the 2010 "flash crash", it took no action against him in that period.

The actions of Mr Khara and Mr Salim began in February and continued until last week, the CME claimed.

It alleged that between March and April 28, Mr Salim repeatedly entered orders or layered multiple orders for gold and silver futures contracts without the intent to trade.

"Salim entered these orders or layered multiple orders to encourage market participants to trade opposite his smaller orders resting on the opposite side of the book," the exchange said in a notice.

After receiving a fill on his orders, he would then cancel the resting order - an order that sits on the trading book - or the layered multiple orders he had entered on the opposite side of the order book, it said.

In an example from April 28, Mr Salim entered small-lot orders on one side of the market in gold futures, after which Mr Khara entered large orders on the opposite side, CME said. When Mr Salim's small orders were filled, Mr Khara cancelled the large orders, it added.

The two traders have been denied access to all CME Group markets for 60 days from April 30, the exchange said.

Mr Salim and Mr Khara could not be reached for comment. CME said Mr Salim has not responded to correspondence from the exchange. CME in London said it does not comment on disciplinary actions.

Additional reporting by Gregory Meyer in New York

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