Vedder Thinking | News Sam Tyfield Quoted in Financial News Article on Recent Transatlantic HFT Clampdown
June 24, 2013
Sam Tyfield, a Partner in Vedder Price's London office and a member of the firm's Investment Services and Finance & Transactions groups, was quoted in a Financial News article titled "Five Questions Raised by the Transatlantic HFT Clampdown." On July 22, 2013, the U.S. Commodity Futures Trading Commission (CFTC) fined high-frequency trading (HFT) firm Panther Energy Trading (Panther) and its founder for using a practice known as "layering" (or "spoofing") over a two-month period in 2011. Separately, the UK's Financial Conduct Authority and futures exchange operator CME Group also fined Panther for what the regulators called "deliberate manipulation" of commodities contracts. According to a CFTC press release, the firm and its owner engaged "in the disruptive practice of ‘spoofing’ by utilizing a computer algorithm that was designed to illegally place and quickly cancel bids and offers in futures contracts" in order to artificially move the price of a stock. As concerns are raised and continue to mount over the potential for market abuse by HFT firms, the Financial News article answers five key questions raised by the fines.
The first question addresses the subject of Panther's direct market access (DMA) provider. Mr. Tyfield weighs in by saying, "There is absolutely no description of Panther’s DMA provider, what systems or controls they had in place and whether they were in the wrong. It is only a matter of time before regulators come after the DMA providers, I believe." The next question addresses who was affected by Panther's alleged market abuse and suggests that the most-affected parties were other HFT firms, rather than long-term investors. The third question explores who "shopped" Panther and why, with the answer being that regulators, the exchange and other trading firms were responsible for detecting Panther's alleged abusive trading. Question four discusses the minimum resting period. Mr. Tyfield again weighs in by saying, "If it smells like market abuse, looks like market abuse, it could well be market abuse/manipulation, but would strict black-letter-law provisions like minimum resting periods or order-to-trade ratios capture all abusive activity and nothing else? Can we ensure that no legitimate trading activity could ever be caught by the laws and that all activity which complied with the laws was not market abuse?" The fifth question concludes the article by addressing whether regulators in the United States and Europe are working together more closely to identify and address market abuse, with the answer being a definitive "yes."
To read the full interview, please click here.