On ‘Spoofing’

Donald MacKenzie

On 21 April, the financial trader Navinder Singh Sarao was arrested in West London. The US authorities are seeking to extradite him to stand trial in Illinois after charges were issued against him by the US Department of Justice. The DoJ alleges he was in the habit of ‘spoofing’ futures markets, by entering orders without genuinely intending to buy or sell, and that this contributed to his trading profits of about $40 million between 2010 and 2014. He is said to have done all this from his home, a semi-detached house on a residential street in Hounslow. Spoofing isn’t new – in fact it is quite common – and although it was explicitly outlawed in the financial reform laws introduced in the US in 2010, legislation was already in place that could have been used to prosecute spoofers. Sarao is, however, so far as I can tell, only the second person to face criminal charges in any jurisdiction for spoofing. The first was a New Jersey futures trader, Michael Coscia, who was indicted in October last year.

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