The US Securities and Exchange Commission (SEC) has charged TD Securities with manipulating the US Treasury cash securities market through an illicit spoofing scheme between April 2018 and May 2019.
The watchdog also charged the bank with “failing to supervise” the head of its US Treasuries trading desk who allegedly made “hundreds” of illegal trades over that period.
The firm was ordered to pay $6.5 million to the SEC, $6 million to FINRA to resolve ‘related charges’, and entered into a deferred prosecution agreement with the US Department of Justice and agreed to pay a total sanction of more than $15 million.
Mark Cave, associate director in the SEC’s division of enforcement, said: “Manipulative and deceptive trading undermines the integrity of our markets. Broker-dealers and other firms cannot ignore their employees’ manipulative conduct and must take meaningful steps to detect and prevent it. Today’s action results from our continuing commitment to combating illicit trading.”
Specifically, a former TD Securities trader was found to have spoofed the US Treasury cash securities market through entering orders with no intention of executing to obtain more favourable execution prices on other orders which were taking place simultaneously which he did intend to execute.
After these intended orders were filled (profiting TD Securities) the trader in question allegedly then cancelled the other orders.
The SEC has ruled that the firm “lacked adequate controls and that it failed to take reasonable steps to scrutinise the trader after receiving warnings of his potentially irregular trading activity”.
Read more: JP Morgan hit with record $920 million penalty after admitting eight-year spoofing scheme
Following the findings, TD Securities has consented to the entry of the SEC’s order finding that it violated an antifraud provision of the federal securities laws as well as having failed to reasonably supervise the trader in question.
The SEC confirmed that it had received assistance from the Fraud Section of the DOJ’s criminal division and FINRA throughout the investigation.