ARB Trading Group hit with fine for commodities Spoofing
The U.S. Commodity Futures Trading Commission (CFTC), which regulates US derivatives markets, has announced that it has issued four orders filing and settling charges against Brendan Delovitch and Wesley Johnson both of Canada, Rajeev Kansal of India, and ARB Trading Group LP, a proprietary trading firm headquartered in Chicago, for spoofing across four exchanges in various agricultural and metals futures contracts.
Specifically, the orders find that the respondents spoofed—the bidding or offering with the intent to cancel the bid or offer before execution—in the lean hogs and live cattle futures contracts traded on the Chicago Mercantile Exchange (CME); silver and copper futures contracts traded on the Commodity Exchange (COMEX); soybean futures contracts traded on the Chicago Board of Trade (CBOT); and cotton, canola, and sugar futures contracts traded on ICE Futures US (ICE). This action was brought in connection with the Division of Enforcement’s Spoofing Task Force and is the first brought in parallel with both ICE and CME Group Inc., which owns and operates CME, COMEX, and CBOT.
The orders against Delovitch, Kansal, and Johnson require each to pay a $100,000 civil monetary penalty and suspend each for four months from trading on or subject to the rules of any CFTC-designated exchange and all other CFTC-registered entities and in all commodity interests. All four defendants are also ordered to cease and desist from violating the Commodity Exchange Act’s spoofing prohibition. In addition, the order imposes a $445,000 civil monetary penalty against ARB Trading.
“This enforcement action demonstrates the CFTC’s commitment to working closely with our regulatory partners to hold wrongdoers accountable,” said Division of Enforcement Director James McDonald. “We will continue to take aggressive action against spoofing in all of its forms and to hold accountable both individual traders and the firms that employ them.”
Related Disciplinary Action
The CFTC’s investigation was conducted in conjunction with parallel inquiries by the CME Group and ICE. Today, CME Group announced disciplinary actions against Johnson, Delovitch, and 303 Proprietary Trading, an ARB Trading subsidiary. Also today, ICE announced disciplinary actions against Kansal, two additional traders, and ARB Trading Group North, an ARB Trading subsidiary. In imposing its civil monetary penalties in these orders, the CFTC took into account the fines imposed by CME Group and ICE in their related actions.
Background on CFTC Orders
With regard to the individual traders, the orders find that: Delovitch engaged in spoofing from May 2017 to December 2017 in CBOT soybean futures, CME live cattle futures, COMEX copper futures, and COMEX silver futures; Johnson engaged in spoofing from March 2017 to July 2017 in CME lean hogs futures and CME live cattle futures; and Kansal engaged in spoofing from May 2018 to April 2019 in ICE cotton futures and from May 2020 to June 2020 in ICE sugar futures.
The order against ARB Trading finds the firm vicariously liable—through two of its subsidiaries—for Delovitch’s, Kansal’s, Johnson’s, and two additional traders’ spoofing, which they each engaged in while trading for ARB Trading. The ARB Trading order finds that one of the additional traders engaged in spoofing from May 2018 to March 2019 in ICE cotton futures, and the other engaged in spoofing from July 2019 to December 2019 in ICE canola futures.