Parsing The DOJ's Flawed Spoofing Theory

Law360 (September 10, 2020, 3:25 PM EDT) -- The Commodity Exchange Act defines "spoofing" as "bidding or offering with the intent to cancel the bid or offer before execution."[1] Put into plain language, the law makes it illegal for traders to enter orders onto securities exchanges that they do not actually want to be filled.

In the only two criminal spoofing cases that have so far gone to trial, U.S. v. Coscia[2] and U.S. v. Flotron,[3] the U.S. Department of Justice presented high-frequency traders, or HFTs, as the defendants' intended victims.

In both cases, the DOJ contended that "trick" orders — i.e., orders intended to be cancelled — were...

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