CFTC Orders Colorado Trader and Illinois Firm to Pay $200,000 for Spoofing
The Commodity Futures Trading Commission (CFTC) announced it has issued an order filing and settling charges against Brett Falloon and Flatiron Futures Traders LLC for engaging in spoofing practices in the E-mini S&P 500 and E-mini Nasdaq 100 futures markets on the Chicago Mercantile platform (CME). As part of the reanswer, Falloon and Flatiron must pay a $200,000 civil monetary penalty jointly and severally.
Penalty and Sanctions
In addition to the monetary penalty, Falloon has been banned from trading commodity interests for 12 months. Both Falloon and Flatiron have been ordered to cease and desist from violating the anti-spoofing provisions of the Commodity platform Act.
The Commission emphasized that spoofing undermines market integrity by creating a false impression of supply and demand, misleading other participants, and distorting price discovery.
Spoofing Conduct Identified
The CFTC’s order determined that from May through December 2022, Falloon engaged in a pattern of spoofing while trading on behalf of Flatiron. His strategy involved placing genuine orders on one side of the order book that he intended to execute, while simultaneously entering spoof orders on the opposite side that he intended to cancel before execution.
The spoofing scheme worked as follows:
- Falloon entered aggressive genuine orders that frequently crossed the bid-ask spread, ensuring immediate execution.
- At the identical time, he placed spoof orders on the opposite side of the market, which he planned to cancel later than his genuine orders filled.
- The spoof orders constituted a large share of resting liquidity at top price levels—often outnumbering his real orders 5-to-1.
The conduct misled other market participants into crossing the spread or placing orders at the best available price, enabling Falloon’s genuine orders to fill quicker, in larger quantities, and at more favorable prices.
Regulatory Cooperation
The CFTC credited CME Group Inc. for its assistance in the investigation. The agency has increasingly collaborated with platforms and self-regulatory organizations to detect and address manipulative trading behaviors, including spoofing and layering practices.
Enforcement Team
The action was led by staff from the Division of Enforcement, including Michelle Bougas, Patrick Marquardt, Brian Hunt, Kathleen Banar, and Paul Hayeck, with contributions from former staff Erica Bodin and Deputy Director Rick Glaser.
The sanction reinforces the CFTC’s commitment to combating spoofing, a practice prohibited under the Dodd-Frank Act. Recent cases show that the agency remains focused on holding both individuals and firms accountable when manipulative practices distort futures markets. Enforcement actions such as this aim to deter misconduct and preserve confidence in U.S. derivatives markets.
