According to CFTC.gov, the Commodity Futures Trading Commission has filed a civil enforcement action against principal trading organization for both ”banging the close” and “spoofing” the IDEX USD Three-Month Interest Rate Swap Futures Contract.
In order to manipulate the value of the three month contract, the CFTC claims that the principal trading organization “banged the close” during the fifteen minute settlement period of the contract.
The CFTC defines “banging the close” as: a manipulative or disruptive trading practice whereby a trader buys or sells a large number of futures contracts during the closing period of a futures contract (that is, the period during which the futures settlement price is determined) in order to benefit an even larger position in an option, swap, or other derivative that is cash settled based on the futures settlement price on that day.
The organization repeatedly placed bids during the settlement period, placing 60 percent of overall bids on the three month contract and actually placing all of the bids on 13 days between January and August of 2011.
The CFTC has determined that the organization had also “spoofed” those bids, defining “spoofing” as: bidding or offering with the intent to cancel the bid or offer before execution.
According to the CFTC, “none of [the principal trading organization] electronic bids were accepted or “hit” to consummate an actual transaction.”