The U.S. Securities and Exchange Commission (SEC) issued charges against a New York-based proprietary trading firm and one of its co-founders for engaging in a manipulative trading strategy known as “spoofing.”

Basically, an SEC investigation found that Briargate Trading and its co-founder, Eric Oscher, constructed a scheme in which sham orders (spoofs) were placed to create the false appearance of interest in stocks and manipulate the prices.

After entering spoof orders, Oscher placed bona fide orders on the opposite side of the market for the same stocks and took advantage of the artificially inflated or depressed prices. Immediately after the bona fide orders were executed, the spoof orders were cancelled.

According to the SEC’s order instituting settled proceedings:

• Oscher and Briargate’s spoofing scheme ran from October 2011 through September 2012 and focused on securities listed on the New York Stock Exchange.
• Oscher, a former NYSE specialist, used his Briargate account to place multiple, large, non-bona fide orders on the NYSE before the exchange opened for trading at 9:30 a.m. Briargate’s non-bona fide orders impacted the market’s perception of demand for the stocks it spoofed and often the prices of the stocks.
• Oscher took advantage of the price movement in the spoofed securities by sending orders for them on the opposite side of the market to exchanges that opened before the NYSE. Oscher cancelled the non-bona fide NYSE orders before the NYSE opened and unwound the positions he had established on other exchanges. Through this conduct, the Oscher and Briargate reaped approximately $525,000 in profits.

Briargate and Oscher agreed to pay more than $1 million to settle the SEC’s charges.

Joseph G. Sansone, co-chief of the SEC’s Market Abuse Unit, said:

Oscher took advantage of our interconnected markets by placing non bona fide orders on one exchange, and then buying or selling the spoofed securities at artificial prices on other exchanges. Notwithstanding these deceptive tactics, the SEC was able to uncover Oscher’s fraudulent scheme and hold him accountable for his actions.

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