Allegations of spoofing and layering can arise in a wide range of market settings and financial instruments. A deep understanding of market microstructure and the ability to effectively analyze large datasets of low-latency trading and order data are critical to these cases.
Our experience includes:
- Conducting screening analysis of large proprietary financial datasets to identify potential problematic conduct (both manual and algorithmic), assess the scope of conduct in question, and analyze trading patterns.
- Ingesting, processing, and analyzing large datasets with tick-level order and trade data, such as financial institutions’ internal order-level data, exchanges’ publicly available market-depth data, and trading venues’ proprietary audit-trail data.
- Assessing allegations of multiple traders’ coordinated spoofing conduct and evaluating their trading behavior in the context of chats and other documentary evidence.
- Analyzing the alleged trading behavior in the context of varying market conditions, as well as financial institutions’ risk management and market making activity.
- Utilizing available datasets to formulate and quantify alleged ill-gotten gains and market loss exposures for financial institutions and trading firms.
- Investigating the potential impact in correlated markets or products.
U.S. Treasuries and Other Fixed Income Products
In multiple consulting matters responding to requests from U.S. and international regulators, Cornerstone Research analyzed large message-level databases containing orders and trades of U.S. Treasury futures, foreign government bond futures, and cash bonds. We have developed screening analysis to capture potential conduct of interest and assessed the state of the order book when the alleged spoofing orders entered the market as well as their alleged impact on prices and quantities. Our experience includes assessing spoofing activity in correlated (futures and/or cash) markets across tenors and assessing algorithmic trading.
We have been retained by global financial institutions in numerous matters involving spoofing allegations in the precious metals markets. We have conducted forensic analyses of precious metals futures markets to investigate traders’ trading conduct in varying market conditions. Our staff and experts have extensive experience assessing traders’ trading strategies and patterns, as well as financial institutions’ risk management and market making activity. Our analysis involves assessing the potential problematic conduct in the context of electronic communications and traders’ spot and ETF market trading activities.
Index Derivatives and Foreign Exchange
In matters involving spoofing allegations of E-mini Futures and foreign exchange markets, we have developed algorithms to identify potential order activity of interest. We have performed in-depth analyses to examine order activity in the context of markets and traders’ trading strategies, risk management, and market making activities. Our analysis involves assessing algorithmic trading patterns in connection with the stated objectives of the programs. Our experience also covers cross-market spoofing activity between spot (cash) markets and the related derivative markets.