From: LONDON (Reuters)
The Financial Conduct Authority (FCA) has fined U.S. based trader Michael Coscia nearly $1 million (652 thousand pounds) for manipulating UK commodities markets, its first penalty on ultra-fast trading.
The FCA said U.S. regulator, the Commodity Futures Trading Commission (CFTC), and the Chicago Mercantile Exchange (CME) are also announcing on Monday they have imposed fines for similar market manipulation by Coscia on U.S. markets.
Ultra-fast high-frequency trading (HFT) uses algorithmic software programmes to post orders in the blink of an eye.
Regulators are taking a closer look at such automated trading which was blamed for exacerbating the "flash crash" on Wall Street in May 2010, when blue chips went briefly into freefall.
The FCA said Coscia used an algorithmic programme in 2011 to "instigate an abusive trading strategy" known as 'layering', or posting orders to create a false and misleading impression of supply and demand.
He placed thousands of false orders for Brent crude, Gas Oil and Western Texas Intermediate futures from the United States on the ICE Futures Europe exchange in Britain, the FCA said.
He made a profit of $279,920 over a six-week period of trading at the expense of other market participants, mainly other HFT traders.
Coscia is not a member of ICE or authorised by the FCA to trade in Britain, but was able to trade from the United States through a broker that offered direct access to the UK exchange.
The FCA said the penalty reflects the serious nature of the deliberate market abuse and the significant impact on ICE, as well as depriving Coscia of the financial benefit derived from this activity.
HFT volumes have come to represent a large chunk of trading on some exchanges and regulators have already moved to inject more transparency into the sector and toughen rules on direct market access.
"Mr Coscia was cheating the market and other participants," said Tracey McDermott, the FCA's head of enforcement. Coscia received a 30 percent discount on the fine by agreeing settlement under the FCA's executive settlement procedures.
(Reporting by Huw Jones, editing by Steve Slater and Louise Heavens)
