UAE traders charged with 'spoofing' NY market

Two traders in the United Arab Emirates have been charged with "spoofing" the New York gold and silver market after an unusually quick investigation by the US futures regulator.

In increments of seconds, Heet Khara and Nasim Salim profited by tricking other market participants with orders they did not intend to execute, the Commodity Futures Trading Commission alleged in a civil complaint filed in a Manhattan federal court on Tuesday.

The new charges of disruptive trading come as the CFTC and CME Group, the Chicago-based exchange operator and self-regulatory organisation, are under scrutiny over alleged spoofing by a UK-based trader whose massive numbers of cancelled orders allegedly contributed to the stock market "flash crash" that took place five years years ago.

The UK-based trader, Navinder Singh Sarao, is fighting extradition to the US, where he was hit with criminal charges of manipulating stock index futures. CME was taken to task for allowing him to continue for years in spite of red flags.

By contrast, both CME and CFTC moved with alacrity against Mr Khara and Mr Salim. Both men were suspended from CME after a period of trading that ended last week. CFTC, which normally takes years to investigate potential violations, cited the "potential for dissipation of defendants' assets" when it filed the case and sought to freeze their assets.

The government watchdog also thanked CME for its assistance.

Aitan Goelman, CFTC enforcement director, said: "Today's actions make clear that the CFTC will partner with self-regulatory organisations to find and swiftly prosecute those who engage in such disruptive trading practices, wherever they may be."

Mr Khara and Mr Salim could not be reached for comment.

The trading at issue began in February. CFTC said that Mr Khara entered orders for gold and silver contracts on CME's Comex metals exchange in New York that he did not intend to execute - action known as spoofing.

Within a span of about 11 seconds early February 18, Mr Khara placed 212 offers to sell silver at prices between $16.490 and $16.465 per ounce, CFTC said. When this drove prices down to the level of smaller purchase orders he had placed, he cancelled all 212 of the offers to sell, CFTC said.

CME informed Mr Khara it was investigating his conduct, CFTC said. By February 25, Mr Khara's futures broker had suspended his electronic trading access over concerns he was spoofing, the complaint said.

Mr Khara then opened an account at a new broker, identified as a Comex clearing group where Mr Salim already had an account. There the men "engaged in similar trading practices in a co-ordinated fashion", as recently as April 28 when they entered and cancelled gold futures orders that caused other traders to fill Mr Salim's orders, CFTC said.

CME suspended the traders last Thursday. On Friday, CME was contacted by a representative of the second broker who said Mr Khara had sent an email falsely suggesting that CME had authorised a return of his funds, CFTC said.

As screens supplant trading floors, CME has touted the globalisation of its customer base. More than 25 per cent of electronic volume in metals is from Europe, the Middle East and Africa, it said last week.

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