A Texas-based crude oil trading firm agreed to pay a civil monetary penalty to settle charges of supervision failures related to spoofing by an employee.

In the Order, the CFTC alleged that Logista Advisors LLC ("Logista"), a registered commodity pool operator ("CPO") and commodity trading advisor ("CTA"), had failed to adequately supervise the handling of its commodity interest accounts by its employees between September 2013 and October 2014. According to the CFTC, Logista failed to provide proper "training, direction, and supervision" to the employee who handled crude oil futures trading. Trading through a New York-based futures commission merchant ("FCM"), the employee allegedly engaged repeatedly in "spoofing" by (i) placing large orders on one side of the market to artificially create the impression of market activity, (ii) placing small orders on the other side of the market, and (iii) cancelling the large orders to the benefit of the smaller orders. For the entirety of this time, Logista supposedly had no written procedures to identify or address such misconduct.

In addition, when the FCM inquired about the employee's misconduct, Logista allegedly failed to sufficiently supervise the investigation and instead provided the FCM with inaccurate information about the suspicious trading activity.

As a result of the misconduct, the CFTC charged Logista with violating CFTC Rule 166.3. Logista will pay a monetary penalty of $250,000 to settle the charges.

Commentary / Bob Zwirb

The CFTC's Order states that Logista is a crude-oil-trading firm that "actively trades in the crude oil futures markets principally to hedge the risks from its options portfolio." In connection with this activity, it also "manages one commodity pool." Presumably, funds from outside investors are involved. Otherwise, if the activity is solely for the purpose of hedging the risks of Logista's options portfolio, a proprietary activity, then it would not seem to come within the definition of a commodity pool. Both the Order and the press release, however, are silent on this point. Nor is there any reference in the Order as to why the trader here was engaging in spoofing and whether that illegal conduct benefited him or his employer.

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