FCA fines trader for market manipulation

For the first time the Financial Conduct Authority (FCA) has taken enforcement action against a High Frequency Trader, as part of its strategy to enhance the integrity of the UK’s financial markets.

According to the FCA, between 6th September 2011 and 18th October 2011 US-based trader Michael Coscia used an algorithmic programme of his own design to instigate an abusive trading strategy known as “layering”.

During this time, Coscia placed thousands of false orders for Brent Crude, Gas Oil and Western Texas Intermediate (WTI) futures from the US on the ICE Futures Europe exchange (ICE) in the UK.

Taking advantage of the price movements generated by his layering strategy, Coscia made a profit of US $279,920 over the 6 week period of trading at the expense of other market participants - primarily other High Frequency Traders or traders using algorithmic and/or automated systems.

Coscia is not a member of ICE or an FCA Approved Person, and traded from the US through a Direct Market Access provider. He has now been fined US $903,176 (£597,993) for deliberate manipulation of commodities markets.

According to the FCA, the penalty is intended to reflect the serious nature of the deliberate market abuse and the significant impact on ICE, as well as depriving Coscia of the financial benefit derived from this activity.

Coscia received a 30% discount on the fine by agreeing settlement under the FCA’s executive settlement procedures; otherwise he would have been fined just over US $1.15 million (£764K). 

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