SPEECHES & TESTIMONY

Remarks of Commissioner Rostin Behnam before Energy Risk USA, Houston, Texas

Delivering a Message on Relationship Patterns

May 15, 2018

 

Introduction

 

Good morning.  It’s an honor to be here with you.  Shortly after being sworn in as a CFTC Commissioner in September 2017, I announced a listening tour.  My goal was, and still is, to spend this first year as a Commissioner traveling to as many places as my schedule (and family) will allow; visiting market participants and stakeholders, both large and small, to help inform my thinking for the balance of my term, specifically about what CFTC rules, regulations, and policies are working or—more importantly—not working.  More simply, how I can be an effective regulator in Washington, D.C.

 

When I first thought about embarking on a listening tour, Houston came straight to mind.  Although New York and Chicago may be the first American cities that many think about as hubs of the domestic derivatives market, I certainly have always considered Houston an equally important location because of the crucial importance this city plays in global energy production and domestic energy independence.  The important role of the end-user cannot be overstated.  And I am confident many of you will agree with me, that the derivatives markets play an integral role in your ability to make short and long-term business decisions regarding everything from exploration, research and development, and transportation – to name just a few.

 

I was flattered to receive an invitation to speak at this distinguished conference, not only as a matter of building a relationship with this key stakeholder and registrant community, but also to share my ideas, on your turf.  Later today I will travel to Austin for a few site visits, and then make more site visits in Houston tomorrow, and wrap up with another speaking engagement in town on Thursday.  A full week for sure, but one that I relish and believe will help shape my thoughts in the future on policy, and your role in our markets.

 

Although I am not new to the issues and challenges that your industry faces, I am still a relatively new Commissioner.  Being a newcomer is not always easy, and when you are making decisions in a new or uncertain environment, risk and trust become crucial factors in the equation.  You need to learn the patterns to better understand relationships.  I am reminded of a story involving my parents, when they were still relative newcomers to this country.  As a relatively new parent myself, this memory, and the lessons I take from it, has that much more meaning today.

 

When I was 8 years-old, I wanted a birthday party.  Now, my parents were not accustomed to the concept of the typical American child’s birthday.  I invited all of my neighborhood friends, and of course, despite my objection, my mother invited some of her friends and their kids, all of whom were also relative newcomers and none of whom were from our neighborhood.

 

We were all having a good time when my mom, who worked as a midwife, had to leave to deliver a baby.  So, she left the party, leaving us kids with her friends. But, remember, my mom’s friends were not from the neighborhood and also not familiar with the practice of helicopter parenting a birthday party.  So when the other parents realized my mother, who they implicitly trusted as a member of our neighborhood, had up and left us with her friends, that trust did not transfer.  This pattern was unfamiliar and there was no relationship with those left in charge, and therefore, we, the children, may as well have been left completely unsupervised.  What could possibly have gone wrong?

 

My friends and I were unaware that there was an issue, and I was very accustomed to the pattern of my mother having to leave at all hours of the day and night, and almost always on short notice, to tend to patients; so this specific occurrence, during my birthday party, didn’t raise any red flags – for me.  And, despite the apparent lack of supervision, there was relatively little risk of leaving us “unsupervised” because my mom’s friends were there, and they were adults with all the skills and capabilities to prevent complete and utter disaster.  Really, all that happened was one adult left.  But trust is a tricky thing to nail down; it can have a variety of meanings depending on the context.  Trust implicitly depends on one’s willingness to depend on somebody--or something--in a given situation with a feeling of relative security.[1]  It is situational and subjective and having patterns and relationships can go a long way to building trust.  In that instance, in that situation, the trust was based on a common pattern, a familiar relationship, and without it, there was risk.  It did not matter whether that risk was real or perceived; the trust was broken.

 

Trust, relationships, and even the need to supervise manifest through human interactions.  It’s been over ten years since the global financial crisis spurred comprehensive regulatory restructuring that introduced new products, exchanges, activities, relationships, and prohibited conduct in the derivatives markets.  At the same time, this massive reform provided the opportunity to shift our markets into the 21st century, embracing fully electronic trading venues, straight-through processing, electronic surveillance and a flurry of innovative compliance and oversight solutions from the FinTech space.  We are increasingly moving away from building trust and analyzing risk based on personal interactions with one another and in the markets.  Instead, we employ algorithms and machine learning that consume data and information, digest patterns and pieces of intelligence, and signal us when it is time to step in with some old fashioned human brainpower.

 

I’m not saying that innovative solutions that no longer require a high degree of human involvement are not valuable.  Indeed, as I’ve said before, the U.S. needs to play a more direct, inclusive role in the FinTech economy and support responsible innovation.[2]  However, as a regulator, I want to be clear that our increasing reliance on the soundness of new structures and technologies does not diminish our commitment to a culture of compliance, rooted in trust and responsible supervision.  It also does not absolve registrants and market participants of their duties under the Commodity Exchange Act (CEA).  Whether you are relying on technology or delegating your duties, your duties to comply with our rules and regulations and contribute to the integrity of our markets cannot be abdicated.

 

I understand that there are members of this audience that believe you’ve been unfairly swept up into the fold of Dodd-Frank regulation.  Many of you represent physical hedgers, end-users with a truly de minimis risk footprint.  Others represent some of the largest players in the energy space, operating in the global markets as dealers that bear little resemblance to the humble, hometown energy companies which one may associate with your corporate logo.  As I fulfill my responsibilities as a Commissioner, considering the road ahead and what policy adjustments the CFTC must make, I will also reflect on the past, specifically the hard work of the previous administration and prior CFTC Chairmen who served in extraordinary times in our markets.  Certainly, not everything was done perfectly; we cannot expect perfection in most facets of life, let alone market oversight when the policy shift is so transformational.  But, I am confident that intentions were sound, the goals were well grounded, and a vast majority of the regulatory principles have been successful.

 

There are a lot of risks inherent in making the decisions we as regulators are entrusted to make.  But, choosing not to act, to not make decisions critical to providing the foundations for the relationships between the regulator and regulated out of fear of falling short impedes market integrity and undermines trust.  I’ve been vocal about wanting to complete the Dodd-Frank agenda and avoid overhauls before having time to adequately reflect.  We are eight-years into implementation and—though this may be an often overused sentiment—it is irresponsible to allow the agenda of the proclaimed perfect to be the enemy of the good.  I am committed to remaining actively engaged in the issues before the Commission, and, as we continue to fine-tune our regulations and consider remedial measures, I will utilize my knowledge and new experiences and reflect and respond, where necessary, to ensure unintended consequences are cured, and the CFTC remains a trusted regulator.

 

Regardless of your registration status, if you are participating in our markets—if you are “any person,”[3] you are subject to the CEA, and perhaps most significantly, to its prohibitions on fraud, manipulation, and disruptive trade practices.  If you are registered with the CFTC, you may have additional duties to diligently supervise various persons and activities within your business line.[4]  And, if you are providing services or acting as a third party vendor to participants and registrants in our markets, that relationship may bring you under our jurisdiction. 

 

Today I would like to share with you my thoughts on the CFTC’s enforcement program and some of the trends in the prosecution of spoofing cases and matters involving supervisory duties and third-party service providers.  Intrinsic to that discussion is the Commission’s leveraging of surveillance and data analytics capabilities in support of those efforts, and how market participants may similarly use data and FinTech to remain compliant and contribute to the overall supervision of our markets.  This last point will lead into a brief discussion of the issues I hope to address as Sponsor of the Commission’s Market Risk Advisory Committee (MRAC).  Finally, I would like to share some high level thoughts on the remaining CFTC agenda for 2018.

 

Enforcement

 

Overview

 

The CFTC’s mission is to foster open, transparent, competitive and financially sound markets, prevent and deter price manipulation and other disruptions to market integrity, and to protect all market participants and the public from fraud, manipulation, and abusive practices.[5]  The CFTC accomplishes its mission through a system of effective self-regulation, direct oversight, and a strong enforcement program.  The Dodd-Frank Act strengthened the Commission’s enforcement authorities in particular through the addition of new and broader anti-fraud and manipulation authorities[6] and the creation of the CFTC Whistleblower Program.[7]  Along with the rules and regulations issued by the Commission to implement these new statutory provisions, the Division of Enforcement’s strength is amplified by consistently attracting top leadership from the United States Attorney’s Office—the chief prosecutor for the United States in criminal law cases.[8] 

 

In March of 2017, Chairman Giancarlo appointed former Assistant U.S. Attorney James McDonald as Director of Enforcement.  In addition to continuing to foster the Commission’s effective working relationship with the Department of Justice, in September Mr. McDonald invigorated efforts to employ a self-reporting strategy to incentivize cooperation and disclosure of violations.[9]  As I’ve mentioned in prior remarks, I appreciate Mr. McDonald’s commitment to ensuring that the enforcement program recognizes that achieving optimal deterrence requires buy-in from the communities we police, i.e. the markets.  That buy-in includes not only ensuring that market participants cooperate in bringing others to justice, but includes clearly articulating expectations through our speaking orders, so that all market participants and persons new to CFTC jurisdiction understand the risks inherent to engaging in certain activities—or failing to engage, when red flags fly.

 

Self-reporting and cooperation, again, relies on trust and relationships.  Trust needs to be earned, of course, and it flows in both directions.  We need to be careful, as an agency, that we do not abdicate (or appear to abdicate) our responsibility to police the markets by simply passing the onus on to the market participants themselves.  Cooperation should work to make us a more effective cop on the beat.  We need to be diligent to make sure that it does, and I will be watching to ensure that we continue to have a robust enforcement program.

 

The Division of Enforcement’s efforts in prosecuting cases under its new anti-disruptive trade practices authority—or anti-spoofing authority, as it is more commonly known, have gone a long way towards addressing major concerns in our markets, especially when it comes to low hanging fruit in terms of the more standard, archetypical violative trading patterns.  The aggressive and coordinated enforcement approach between the CFTC and the Department of Justice (DOJ) is one factor.  Another is the increased effective use of data.  Enforcement is utilizing Commission data, analytics, and forensics and leveraging the tools utilized by self-regulatory organizations like CME Group to monitor for and detect conduct and patterns typical of spoofing and other manipulative behaviors.  A Spoofing Task Force recently emerged to coordinate efforts internally across the Enforcement offices in Washington, New York, Chicago, and Kansas City.  Beyond detection, by working with our criminal law enforcement partners, bringing actions against individual bad-actors and those who fail to establish and implement adequate supervisory and compliance programs, and incentivizing whistleblowing by strengthening anti-retaliation protections, the Commission is aiming to incite compliance culture and maximize deterrence.[10]

 

Trends

 

Although arguably already embedded in the CEA as prohibited conduct as a form of fictitious trading or manipulative activity[11], “spoofing” entered our lexicon as part of the Dodd-Frank Act in 2010 and generally prohibits “bidding or offering with the intent to cancel the bid or offer before execution.”[12]  Spoofing is when a trader is placing orders in the market that he or she has no intention of trading to create the appearance that the price of the commodity is trending either up or down, and then executing orders designed to take advantage of that price movement.  Spoofing introduces false information into the market, undermining market integrity and harming those who play by the rules and who use the markets to hedge their risks.  Evidence of spoofing is identifiable by patterns.  But, as we will get to, a pattern alone cannot always be trusted.  Though easy to identify and label, a violation of spoofing requires intent.  And at this point in the case law, that still requires a human.

 

In January, the Commission announced the filing of eight actions involving spoofing and related manipulative activity.[13]  The actions involved the settlement of three corporate cases against major financial institutions, and the filing of five complaints charging six individuals and one company with spoofing and manipulation in the futures markets.  The corporate cases are all significant in that they involved global banking and financial services firms and fines ranging from $1.6 to $30 million—all of which would have been substantially higher but for each banks’ substantial cooperation and remediation efforts.  As well, in the case of one bank, the significant civil monetary penalty reflects additional findings of supervisory failures.

 

In one of the corporate cases, the Order found that during a six and a half year period, traders engaged in a scheme to manipulate the price of precious metals futures contracts by utilizing a variety of manual spoofing techniques with respect to precious metals futures contracts traded on the Commodity Exchange, Inc. (COMEX), and by trading in a manner to trigger customer stop-loss orders.[14]  Generally, according to the Order, the traders placed large bids or offers in the futures market with the intent to cancel before execution (spoof orders) after another smaller bid or offer (resting order) was placed on the opposite side of the same market.  According to the Order, the traders placed their spoof orders with the intent to create the false appearance of market depth, which they knew would and did create the impression of greater buying or selling interest than would have existed otherwise.  The Order found further that the firm failed to perform its supervisory duties diligently—an independent violation of Commission Regulation 166.3.  Specifically, the Order found that while the firm’s electronic surveillance system identified specific instances of potential misconduct, it did not follow up on the majority of those red flags.  As well, while the firm’s surveillance systems alerts put it on notice of potential misconduct, it failed to take adequate steps to address or remedy the issues.[15]

 

As I mentioned, a violation under Commission Regulation 166.3 is an independent violation for which no underlying violation is necessary.  A violation of Regulation 166.3 is demonstrated by showing either that: (1) the registrant’s supervisory system was generally inadequate; or (2) the registrant failed to perform its supervisory duties diligently.[16]  As our developing spoofing case law demonstrates, this duty to supervise includes ensuring that employees receive sufficient training and that their activities are monitored through adequate systems and controls to detect spoofing.

 

In January 2017, the Commission issued an order filing and settling charges against a firm dually registered as a futures commission merchant and swap dealer.[17]  In addition to finding that five of the firm’s traders engaged in spoofing more than 2,500 times in various Chicago Mercantile Exchange (CME) U.S. Treasury futures products over roughly a 17-month period, the Order found several related supervision failures.  The Order found that the firm provided insufficient training, emphasizing that, for most of the traders involved the only communication they received about spoofing consisted of a single compliance alert containing the CEA’s anti-spoofing language.  The Order also found that the firm failed to have adequate systems and controls in place to detect the spoofing, and that even when alerted to a spoofing incident involving one of its traders, a supervisor and other members of the desk failed to comply with then existing policies regarding reporting violations of the Act.[18]

 

Returning to the January 2018 matters, the civil complaints include charges against three individuals who allegedly engaged in spoofing and manipulation as traders for major banks, and who allegedly taught their subordinates to spoof as well; two individuals who allegedly engaged in spoofing and manipulation as traders for proprietary trading firms; and one individual and company who allegedly built a computer program designed to spoof and manipulate the market.[19]  I think this last matter is worth a few moments of time given the nature of the conduct at issue.

 

Backing up a bit, spoofing can be challenging to prove because it requires evidence of the defendant’s intent to cancel a bid or offer prior to execution.  Because orders can go unfilled or be cancelled for legitimate reasons, and some market makers employ high frequency trading strategies that are legal, and may result in a large percentage of cancelled orders, in isolation, trade data may not be enough to support a finding of intent in a spoofing matter.  That is, the pattern alone may not evince misconduct.  We need to go further into understanding the intent behind the pattern.  Of course, that wasn’t such a stretch in the criminal case of Michael Coscia, which followed and was aided by a prior CFTC civil settlement.[20]

 

Coscia was the first trader to be convicted on spoofing charges, and in August 2017, became the first to have his conviction upheld in a United States Court of Appeals.[21]  Just yesterday, the Supreme Court denied Coscia’s Petition for Certiorari, making the decision of the Court of Appeals final.[22]  Coscia commissioned the design of computer algorithms to place and quickly cancel bids and offers in a number of futures contracts in the CME Group markets and on the ICE Futures Europe exchange.  At trial, testimony from Coscia’s programmer revealed that Coscia had asked him to create a program that would act “[l]ike a decoy” to “pump [the] market.” [23]  The government demonstrated, relying in part on Coscia’s prior testimony from a deposition taken by the CFTC, that Coscia’s algorithm was designed to enter but avoid executing any of the large orders responsible for triggering favorable market moves, automatically cancelling the large orders under any conditions where they were at risk of being filled.[24]

 

Getting back to the individual and company who allegedly built a computer program designed to spoof and manipulate the market, the allegations in the matter include aiding and abetting spoofing and a manipulative and deceptive scheme.  According to the complaint, the individual is a computer programmer with over eighteen years of experience programming custom software applications for the trading industry.[25]  As alleged, the programmer and his company designed and developed a custom trading software application for a trader that would help him spoof and inject false information into the market regarding supply and demand for the E-mini S&P.  The programmer and others worked closely with the trader to meet the desired specifications.  The trader, as alleged, ultimately engaged in thousands of practices involving spoofing.  The complaint alleges that the programmer –who himself was knowledgeable regarding various strategies used by high frequency and algorithmic traders, and was familiar with how those strategies could affect trading in the futures markets, including by disrupting orderly trading and contributing to spoofing—and his company aided and abetted the trader’s spoofing by designing and developing the custom trading software which they understood would be used to engage in spoofing.[26]

 

The Message

 

I think our Enforcement Director said it best back in January when he remarked that the CFTC’s goals of holding wrongdoers accountable and deterring future misconduct are best achieved by holding companies and individuals accountable.  The Commission is working hard to identify and prosecute individual traders who engage in spoofing as well as individuals who teach others how to spoof, who build the tools designed to spoof, or who otherwise aid and abet the wrongdoing.

 

The Commission’s spoofing initiatives provide a plethora of examples of bad actors abusing technology to inject false information into the market, distorting prices, destroying trust and undermining market integrity.  There are also examples of other, perhaps not as bad actors, failing to use technologies to detect, deter, and otherwise generally supervise those for whom they are responsible.  Our own surveillance and use of more sophisticated technologies coupled with increased self-reporting and cooperation and the involvement of our criminal counterparts, have cumulatively contributed to the disappearance of some of the more obvious spoofing patterns.  While the more sophisticated schemes will likely continue to infect our markets, I am confident that we have the right cops on the beat.

 

Pivoting slightly towards how I’ve been processing the facts and figures coming out of our Enforcement program in the context of my role at the Commission, I am reminded again of the constant need to check in with one another, to build trust, and work on relationships.  During a panel on electronic access at a recent industry conference, a senior director for market regulation at one of the larger future exchanges noted that as more traders migrate from bilateral trading to electronic exchanges, there is a presumption that there are rules, but they aren’t always sure as to what they are and how they apply.  There is also a tendency to presume that the electronic nature of their new automated environment may provide a false sense of supervision, that there is constant monitoring for risky behaviors and risk generally, and so, individual duties are somewhat lessened.  We need to make sure our newcomers are brought into the fold, and become part of our community.  As much as we can talk about cooperation, and as much as our speaking orders can describe how certain actions and failures to act run afoul of our statute and regulations, we as regulators need to be clear as to where the lines are drawn.  We must make sure that our goals and objectives for the integrity of our markets do not get lost in translation.

 

Market Risk Advisory Committee

 

As many of you know, I am the sponsor of the CFTC’s Market Risk Advisory Committee (MRAC).  The Committee is tasked with advising and making recommendations to the Commission on matters relating to evolving market structures and risk, as well as systemic issues that impact the stability of the derivatives markets and other financial markets.  I convened the Committee in January to provide a public forum for an open dialogue regarding the CFTC’s regulatory self-certification process for new products, specifically those in the crypto-asset space.  Since that time, my team and I have worked diligently on renewing the MRAC’s charter, reconstituting its membership, and setting its agenda.  Phase One of this process is now complete with the approval and publication of the renewal charter last week.  Phase Two, membership selection, is winding down and I anticipate notifying candidates in the next few weeks.  I hope to convene the Committee in July and one additional time before the year ends.

 

I thank all of you who submitted nominations for membership as well as suggestions for MRAC priorities.  Based on the tremendous feedback received, the MRAC’s agenda will consist of a wide range of issues involving benchmark risk, clearinghouse risk, operational risk and third-party service providers, and financial technology risk, all of which could have an impact on financial stability and are ripe for discussion.  Consistent with my remarks this morning, identifying risk, and attempting to develop sound policy that balances risk reduction with market innovation and development, will importantly include identifying patterns and building relationships.  I am excited about the MRAC, and believe, under my leadership, it will serve as a venue of deep, thoughtful consideration of critical market issues that affect all participants.

 

The Remains of 2018

 

In the next few months, the Commission, under Chairman Giancarlo’s leadership, will likely move forward on major rulemaking efforts on the swap dealer de minimis threshold and swap execution rules.  As well, the Commission will begin to issue various burden-reducing proposals in support of the Project Kiss Initiative.  We will likely round out the year with a re-proposal of the position limits rule, although that timing may be tempered by the hopeful appearance of new commissioners.

 

As the Commission starts to throttle up work in the second half of this year, I am hopeful and committed to ensuring the CFTC remains diligent in its core responsibilities, including – as I mentioned earlier – fulfilling its mission.  As with many other agencies, the CFTC is grappling with a tight budget, and has been doing so for a number of years.  We are fully focused on doing more with less.  This is a challenge we do not shy away from, and as an organization are committed to meeting.

 

Closing

 

I started these remarks with an anecdote from my childhood.  One of those special, or at least in the case of my birthday party, unique moments in time that gets chiseled in the mind.  These memories serve as benchmarks, as lessons, as capsules to reflect on in future endeavors.  And as I continue to build my time as a CFTC Commissioner, I hope to initiate and create more of these memories in our space, in a manner that helps all of us develop a relationship founded on trust, transparency, and commitment.  I am confident that with these principles in mind, we can mutually achieve our goals, support American enterprise and economic growth, and continue to build the safest, strongest and most desirable derivative markets in the world.  Thank you.

 

[1] Jøsang A., Presti S.L. (2004) Analysing the Relationship between Risk and Trust. In: Jensen C., Poslad S., Dimitrakos T. (eds) Trust Management. iTrust 2004. Lecture Notes in Computer Science, vol 2995. Springer, Berlin, Heidelberg.

[2] See, e.g., Rostin Behnam, Our Charming Ways: Keynote of Rostin Behnam at the FIA 40th Annual Law & Compliance Division Conference on the Regulation of Futures, Derivatives and OTC Products, Washington, DC, (May 3, 2018), https://www.cftc.gov/PressRoom/SpeechesTestimony/opabehnam5.

[3] Commodity Exchange Act § 1a(38), 7 U.S.C. § 1a(38) defining “person” as importing the plural or singular, and including individuals, associations, partnerships, corporations, and trusts.

[4] 17 CFR §§ 20.602 and 166.3.

[5] Commodity Exchange Act § 3, 7 U.S.C. § 5.

[6] See, e.g. Commodity Exchange Act §§ 4c(a)(5), 6(c), and 23, 7 U.S.C. §§ 6c(a)(5), 9, and 26.

[7] U.S. Commodity Futures Trading Commission Whistleblower Program, https://www.whistleblower.gov/ (last visited May 14, 2018).

[8] Since the passage of the Dodd-Frank Act, the Directors of Enforcement have included three former Assistant United States Attorneys from the Southern District of New York: David Meister (November 2010-October 2013); Aitan Goelman (June 2014- January 2017); and James McDonald (March 2017-present).

[9] James McDonald, Speech of James McDonald, Director of the Division of Enforcement Commodity Futures Trading Commission Regarding Perspectives on Enforcement: Self-Reporting and Cooperation at the CFTC, NYU Program on Corporate Compliance & Enforcement/Institute for Governance & Finance (Sept. 25, 2017), http://www.cftc.gov/PressRoom/SpeechesTestimony/opamcdonald092517.

[10] CFTC, Statement of CFTC Director of Enforcement James McDonald (Jan. 29, 2018), https://www.cftc.gov/PressRoom/SpeechesTestimony/mcdonaldstatement012918; Press Release Number: 7559-17, CFTC, CFTC Strengthens Anti-Retaliation Protections for Whistleblowers and Enhances the Award Claims Review Process (May 22, 2017), https://www.cftc.gov/PressRoom/PressReleases/pr7559-17.

[11] See Commodity Exchange Act §§ 4c(a),9(a)(2), 7 U.S.C. §§ 6c(a), 13(a)(2).

[12] Commodity Exchange Act § 4c(a)(5) , 7 U.S.C. § 6c(a)(5).

[13] Press Release Number 7681-18, CFTC, CFTC Files Eight Anti-Spoofing Enforcement Actions against Three Banks (Deutsche Bank, HSBC & UBS) & Six Individuals (Jan. 29, 2018), https://www.cftc.gov/PressRoom/PressReleases/pr7681-18.

[14] In re Deutsche Bank AG and Deutsche Bank Securities Inc., CFTC No. 18-06 (Jan. 29, 2018), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrenforcementactions/documents/legalpleading/enfdeutschebankagorder012918.pdf.

[15] Id. at 10.

[16] Id. citations omitted.

[18] Id. at 4-5.

[19] Statement of CFTC Director of Enforcement James McDonald, supra note 10.

[20] Coscia’s criminal conviction followed a series of investigations and civil actions against Coscia and his high‑frequency trading firm, Panther Energy Trading LLC, regarding the spoofing and related conduct by the CFTC, the U.K. Financial Conduct Authority (FCA), and the CME Group.  These actions settled for a total of approximately $4.5 million in penalties and disgorgement. The CFTC also imposed a one-year trading ban on Coscia and Panther Energy.  See Press Release Number 6649-13, CFTC, CFTC Orders Panther Energy Trading LLC and its Principal Michael J. Coscia to Pay $2.8 Million and Bans Them from Trading for One Year, for Spoofing in Numerous Commodity Futures Contracts (July 22, 2013), https://www.cftc.gov/PressRoom/PressReleases/pr6649-13; see also In re Panther Energy Trading LLC and Michael J. Coscia, CFTC N. 13-26 (July 22, 2013), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@lrenforcementactions/documents/legalpleading/enfpantherorder072213.pdf

[21] In United States v. Coscia, the U.S. Court of Appeals for the Seventh Circuit unanimously upheld Coscia’s conviction on spoofing and commodities fraud charges.  The Court of Appeals rejected his constitutional challenge to the CEA’s anti-spoofing provision and found Coscia’s conviction adequately supported by the evidence and testimony adduced at trial.  Coscia filed a petition for certiorari with the Supreme Court in February 2018, which was denied.  See United States v. Coscia, 866 F.3d 782 (7th Cir. 2017), cert. denied, ___ U.S.___(U.S. May 14, 2018) (No. 17-1099).

[22] Id.

[23] Coscia, 866 F.3d at 789.

[24] Id. at 789-90.

[26] Id. at 12.