Washington DC – The U.S. Commodity Futures Trading Commission (CFTC) has announced a Consent Order issued by Judge Amy J. St. Eve of the U.S. District Court for the Northern District of Illinois against Igor B. Oystacher and his proprietary trading firm, 3red Partners LLC, also known as 3Red Trading LLC. The order mandates that Chicago-based 3Red Partners and Oystacher pay a significant penalty of $2.5 million for engaging in manipulative and deceptive spoofing tactics while trading futures contracts across multiple exchanges over a period exceeding two years.
This legal action originates from a CFTC complaint filed on October 19, 2015, which accused Oystacher and 3Red Partners of employing spoofing strategies and manipulative devices while trading various futures contracts, including E-Mini S&P 500, Copper, Crude Oil, Natural Gas, and VIX futures. These contracts were traded on several exchanges, detailed in the initial CFTC Complaint and Press Release 7264-15.
Sanctions Include Substantial Penalty and Trading Monitoring for 3Red Partners
The court’s Order imposes substantial sanctions on both Oystacher and 3Red Partners. Beyond the $2.5 million civil monetary penalty, which they are jointly and severally liable for, the Order also mandates a rigorous independent monitoring system. For the next three years, an independent monitor will scrutinize all futures trading activities conducted by 3Red Partners and Oystacher. This monitoring is designed to detect and prevent any future violations of the Commodity Exchange Act (CEA) and CFTC Regulations, specifically those violations that were outlined in the charges. Additionally, for a period of 18 months, 3Red Partners and Oystacher are required to implement specific compliance tools across all of Oystacher’s futures trading activities on U.S. exchanges. Furthermore, the Order permanently prohibits 3Red Partners and Oystacher from engaging in spoofing and using any manipulative or deceptive devices in their futures trading. This includes the prohibited practice of entering bids or offers with the intention of canceling them before they are executed.
[placeholder image of gavel and court documents, alt text: Gavel and court documents representing the penalty against 3Red Partners for trading violations.]
CFTC’s Strong Stance Against Spoofing by Firms like 3Red Partners
Aitan Goelman, the CFTC’s Director of Enforcement, emphasized the significance of this Order, stating, “This Order sends a strong message to the financial markets that the CFTC will aggressively investigate, prosecute, and penalize spoofing and manipulative conduct, whenever they occur.” This statement underscores the CFTC’s commitment to maintaining fair and transparent markets and holding firms like 3Red Partners accountable for manipulative practices.
The Order specifically details that Oystacher and 3Red Partners deliberately and repeatedly engaged in a spoofing scheme while trading spot-month contracts in several key futures markets. These included the E-Mini S&P 500 futures contracts on the Chicago Mercantile Exchange (CME), crude oil and natural gas futures contracts on the New York Mercantile Exchange (NYMEX), copper futures contracts on the Commodity Exchange Inc. (COMEX), and the volatility index (VIX) futures contract on the CBOE Futures Exchange (CFE). These activities took place over at least 51 trading days between December 2011 and January 2014.
How 3Red Partners Executed the Spoofing Scheme
The court found that 3Red Partners, under Oystacher’s direction, executed this spoofing scheme by strategically placing passive displayed orders. These orders were placed at or near the best price on one side of the market, positioned behind existing orders. The size and number of these orders were designed to create a false impression of market depth. Crucially, 3Red Partners then cancelled these large orders almost immediately before entering an order on the opposite side of the market at the same or a better price. This tactic allowed 3Red Partners to execute trades in volumes and at price points that would not have been achievable under normal market conditions, effectively manipulating the market through spoofing.
[placeholder image of trading chart showing market manipulation, alt text: Trading chart illustrating market manipulation tactics used by 3Red Partners.]
The CFTC acknowledged the crucial cooperation and assistance received from various market and regulatory bodies in their investigation. These included the Market Regulation Departments of the CME Group, CFE, the National Futures Association (acting on behalf of the CFE), and the Intercontinental Exchange (ICE). International cooperation was also vital, with assistance from the United Kingdom’s Financial Conduct Authority (FCA), France’s L’Autorité des marchés financiers (AMF), Germany’s Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), and the Exchange Supervisory Authority of Frankfurt Stock Exchange and Eurex Deutschland.
The CFTC Division of Enforcement staff members who were instrumental in this case were also recognized for their dedication and expertise in bringing this enforcement action to a successful conclusion.
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Last Updated: December 20, 2016
