Deutsche Bank, UBS and HSBC incur $46 million penalty for spoofing

Three major investment banks allegedly carried out various frauds and spoofing on precious metals futures contracts.

Authorities in the US have taken enforcement action against Deutsche Bank, UBS and HSBC, imposing a combined $46.6 million penalty on the three institutions.

The Commodity Futures Trading Commission (CFTC) alongside the Department of Justice and the Federal Bureau of Investigation brought the charges to the three investment banks and six individuals.

Deutsche Bank will pay the largest penalty of $30 million for manipulating prices in precious metals futures contracts between 2008 and 2014.

According to the filing, the bank failed to supervise traders who placed large bids or offers on futures contracts with the intention of cancelling before execution, while also failing to implement a surveillance system to spot potential spoofing activities.

UBS incurred a $15 million penalty for the same alleged spoofing of precious metals futures contracts through price fixing and false bids. 

The CFTC found one trader at UBS placed orders and executed trades to manipulate the price of the contracts in order to trigger customer stop-loss orders and profit on proprietary trading.

UBS’ monetary penalty was significantly lower than Deutsche Bank’s as it self-reported the spoofing activity and cooperated with the investigation, according to the filing.  

HSBC was found to have carried out spoofing primarily on gold futures contracts between 2011 and 2014, and will pay a $1.6 million penalty.

Division of enforcement director, James McDonald, described spoofing as being a particularly “pernicious example of bad actors seeking to manipulate the market” using technology.

“The technological developments that enabled electronic and algorithmic trading have created new opportunities in our markets,” he said.

“As these cases show, we will work hard to identify and prosecute the individual traders who engage in spoofing, but we will also seek to find and hold accountable those who teach others how to spoof, who build the tools designed to spoof, or who otherwise aid and abet the wrongdoing.”