CFTC Imposes $200,000 Fine and 12-Month Ban on Flatiron Futures and Trader for Spoofing

The Commodity Futures Trading Commission (CFTC) has entered an order filing and settling charges against Colorado trader Brett Falloon and Illinois-based entity Flatiron Futures Traders LLC for engaging in spoofing activities across major equity index futures markets. According to the regulatory order, the illicit trading took place between May and December 2022. Falloon, trading on behalf of Flatiron Futures Traders LLC, engaged in spoofing within the E-mini S&P 500 and E-mini Nasdaq 100 futures markets on the Chicago Mercantile Exchange (CME). The scheme involved submitting bids and offers with the explicit intent to cancel them before execution. The CFTC found that Falloon utilized a distinct pattern to manipulate market pricing. He submitted aggressive genuine orders designed to cross the bid-ask spread on one side of the order book, while simultaneously placing non-bona fide spoof orders on the opposing side. The spoof orders represented a significant portion of resting volume at top price levels, with the aggregate number of spoofed contracts outnumbering legitimate contracts by a ratio of five to one. This deceptive strategy was intended to mislead market participants into believing there was substantial supply or demand, prompting them to execute against Falloon's genuine orders or place resting orders at the best offer. Once his genuine orders were filled, Falloon promptly canceled the spoof orders, thereby securing faster fills, larger trade volumes, or more advantageous prices. As part of the settlement, Falloon and Flatiron Futures Traders LLC are required to pay a joint and several civil monetary penalty of $200,000. Additionally, Falloon has been handed a 12-month ban from trading commodity interests. Both parties must cease and desist from further violations of the Commodity Exchange Act's anti-spoofing provisions. The CFTC acknowledged the Division of Enforcement staff involved in the case and expressed appreciation to CME Group Inc. for its assistance throughout the investigation.