Trader indicted for manipulating commodity prices

Source: Associated Press

Trader indicted for manipulating commodity prices
By MICHAEL TARM, Associated Press | October 2, 2014 | Updated: October 2, 2014 6:59pm

CHICAGO (AP) — A New Jersey high-frequency trader is facing charges for allegedly manipulating commodities prices by issuing false signals to the market and then profiting off them using software that executes trades within milliseconds, federal prosecutors announced Thursday, in what they described as a first-of-its-kind prosecution.

Michael Coscia, 52, is accused of illegally earning around $1.5 million through the Chicago-based CME Group — the world's largest operator of futures exchanges — and European futures markets in 2011. The U.S. attorney's office in Chicago said it's the first case under major changes to federal commodities law in 2010, when Congress enacted the Dodd-Frank Wall Street reforms after the financial crisis.

High-frequency trading was the subject of Michael Lewis' best-selling book "Flash Boys," which chronicled how Wall Street traders sought profits and a jump on competitors through ever-faster computer systems down to fractions of a second. Powerful computers analyze market information and then execute buy and sell orders within milliseconds, or thousandths of a second. The practice has come under increasing scrutiny, with the FBI confirming earlier this year that it had been investigating such firms.

Critics argue that it can lead to wild swings in the market and unfair advantages for companies with faster computers.

"Traders and investors deserve a level playing field," U.S. Attorney for Northern Illinois Zachary Fardon said in a statement announcing the indictment by a grand jury in Chicago.


Read more: http://www.chron.com/news/crime/article/Feds-Trader-made-1-5M-by-manipulating-prices-5796579.php