Justice Department Reviewing Potential Market Manipulation By Allston Trading

The high-frequency trading company Allston Trading LLC is currently under investigation by the U.S. Justice Department, which is conducting a criminal probe to determine if Allston conducted market manipulation activities.

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The company issued a statement saying they have “received requests for information from the government and have cooperated with such requests.” The spokesman added, “We have not been accused of any illegal conduct arising from those requests, and it would be wrong to draw any inference to that effect from the mere fact that the government is conducting a review,” the spokesman said in an emailed statement. “It is our understanding that the government is examining the trading activities of many firms across the industry.”

The DOJ, along with the U.S. Commodity Futures Trading Commission (CFTC) have started investigations of market manipulation in recent years. The practice of spoofing (intentionally submitting buy or sell orders and canceling them before they take effect so the market prices move) has been a particular focus of the probes. Spoofing was banned by the 2010 Dodd-Frank Act.

Chopper Trading LLC, a former competitor of Allston, is currently suing the latter, alleging that Allston manipulated the U.S. treasuries market from 2012 to 2015. In the complaint filed by Chopper, the company claims that the spoofing activities by Allston, “caused millions of dollars in trading losses for Chopper,” and forced it to sell off its trading assets. Allston requested that the case go into arbitration or be dismissed by a federal judge, but that ruling is yet to come.

Allston was previously sued by a Chicago Board of Trade trader in 2015 for similar allegations regarding spoofing. The lawsuit was dropped months later.

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Reference: Bloomberg Law