U.S. financial regulators continued to show their long reach globally, as the U.S. Commodity Futures Trading Commission (CFTC) issued an order simultaneously filing and settling charges against UK-based trader Adam Cobb-Webb for engaging in multiple instances of spoofing in West Texas Intermediate (WTI) light sweet crude oil futures contracts traded on New York Mercantile Exchange, Inc. (NYMEX) from approximately December 16, 2021 through at least January 14, 2022.

The order requires Cobb-Webb to pay a $150,000 civil monetary penalty and imposes a one-year ban from trading on or subject to the rules of any CFTC-designated exchange and all other CFTC-registered entities and in all commodity interests. Cobb-Webb is also ordered to cease and desist from violating the spoofing prohibition in the Commodity Exchange Act (CEA).

“This order is the latest in a long series of actions by the Commission to punish spoofing in the markets the Commission oversees,” said Director of Enforcement Ian McGinley.  “Spoofing is easier than ever for the Commission to identify and pursue. Our message to would-be spoofers is this: Don’t.”

Case Background

The order finds during an approximately one-month period, Cobb-Webb placed bids and offers for WTI futures with the intent to cancel his bids or offers before execution—i.e., spoofing. Cobb-Webb’s spoofing was characterized by a pattern of trading in which he placed an iceberg order on one side of the order book (whose order quantity was only partially visible in the order book) that he intended to execute and a series of fully-displayed orders on the opposite side of the order book at the first few price levels that he intended to cancel before execution (spoof orders). After Cobb-Webb’s iceberg order received fills, Cobb-Webb would cancel his fully-displayed spoof orders. Cobb-Webb engaged in this pattern of trading on a daily basis during the relevant period.

Cobb-Webb’s fully-displayed spoof orders typically constituted a large percentage of orders resting at the top price levels at the time they were placed. The quantity of Cobb-Webb’s spoof orders also was often several times larger than the visible quantity of Cobb-Webb’s iceberg orders. Cobb-Webb entered the spoof orders with intent to cancel, and to create a false impression of buying or selling interest that would induce other market participants to cross the bid-ask spread and fill his iceberg orders. Cobb-Webb knew or recklessly disregarded that the spoof orders would create the false appearance of market depth and result in misinformation about supply and demand that could affect market activity.

The CFTC said it thanks the CME Group for its assistance in this matter.