High frequency trader fined more than $3m by regulators

BBC 22 July 2013-07-23

Financial regulators in the UK and US have fined a high frequency trader and his firm more than $3m (£1.95m) for manipulating commodities markets.

The UK's Financial Conduct Authority (FCA) fined Michael Coscia $903,176, while two US regulators levied the rest on him and his company, Panther Energy….

It is the first time the FCA has taken action against a high frequency trader.

Between 6 September 2011 and 18 October 2011, US-based Mr Coscia used algorithmic programs that he developed to create false orders for oil and gas on trading exchanges in the US and UK.

He made about $1.4m during the period using a computer program which placed and quickly cancelled trades to manipulate the price of commodities, an illegal process known as "layering" and "spoofing".

Tracey McDermott, the FCA's director of enforcement and financial crime, said: "Mr Coscia was cheating the market and other participants.

"High frequency trading and the use of algorithms are an important and commonplace part of the markets nowadays but in this case these techniques were deliberately designed to abuse the market, undermining its integrity.

"This is unacceptable, which is why we have taken tough action to punish Coscia and deprive him of any benefit he acquired."…

High frequency trading is coming under increasing scrutiny by regulators. Automated trading was blamed for exacerbating the "flash crash" on Wall Street in May 2010, when blue chips went briefly into freefall, and then recovered almost as quickly.

There have been many reports and complaints about this fraudulent trading methods and how dangerous it is other than cheating other innocent investors. The only reason that they are allowed to practise in stock markets in US and UK is because the lawmakers and regulators have been bought and paid to shut up.

Would HFT be allowed in the Singapore Stock Exchange? Are the Singapore Govt and the regulators fully briefed and understand that this kind of trading is basically cheating the ignorant and innocent investors and would not only cause them to lose their pants, it would eventually destroy the confidence of the stock market for fair play and providing a level playing field.

Would the authority and regulators approve this unfair system that could cause more damage than the Lehman Bonds and toxic notes? The risks and dangers of this trading method are all there to see. Anyone who chooses to ignore them must ultimately be responsible for the damages and fallout when big damages are inflicted on the investors and the stock market. The people who authorise and approve HFT cannot plead ignorance and must be fully held accountable and responsible for full consequences of this decision. The Govt would have to share a big part of the blame.

Everyone has been warned and there is all the time to stop HFT from entering the trading system. Would there be anyone responsible enough to pull the plug and put a stop to this self inflicted impending carnage?