Back in late 2013 and early 2014, the gold (and silver) market was stunned by a series of massive, unprecedented “stop” or “velocity logic” sales which sent the price of the precious metal crashing so furiously they halted the entire gold futures market anywhere between 10 and 20 seconds. Some examples:
Some said this was nothing but a fat finger, but we together with Nanex showed this was clearly a premeditated attempt to reprice gold lower, facilitated by that oldest trick in the HFT book: quote stuffing.
As a reminder, only recently did regulators finally realize just how manipulated the gold market is when in early May, after a Zero Hedge post explicitly showed just how “someone” was spoofing gold, both the CME and the CFTC cracked down on the manipulator. However the moves that had seen regulatory intervention were paltry and largely irrelevant in the grand scheme of gold “price discovery.”
Until today.
In Notice of Disciplinary action, COMEX 14-9807-BC, the CME charged Mirus Futures, which one year ago was bought by NinjaTrader with “disruptive and rapid price movement in the February 2014 Gold Futures market” which prompted the abovementioned Velocity Logic event which halted the market for ten seconds.
From the allegation:
Pursuant to an offer of settlement Mirus Futures LLC (“Mirus” or the “Firm”) presented at a hearing on June 16, 2015, in which Mirus neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“BCC”) found that it had jurisdiction over Mirus pursuant to Exchange Rule 418 and that on January 6, 2014, Mirus failed to adequately monitor the operation of its trading platform (Zenfire), and connectivity of its trading system (Zenfire) with Globex. This failure resulted in unusually large and atypical trading activity by several of the Firm’s customers and caused the mass entry of order messages by Zenfire, which resulted in a disruptive and rapid price movement in the February 2014 Gold Futures market and prompted a Velocity Logic event.
The Panel found that as a result, Mirus violated Rules 432.Q. (Conduct Detrimental to the Exchange) and 432.W. (Failure to Supervise).