Tower Research Capital: The Joy of Spoofing

On November 7, 2019, the U.S. CFTC (Commodity Futures Trading Commission) announced that it was ordering proprietary trading firm, Tower Research Capital, LLC (TRC), to pay $64.7 million in restitution, disgorgement and penalties for what amounts to the “largest total monetary relief ever ordered in a spoofing case.” Apparently, this is all due to activity in equity index futures (at least) between March 2012 and December 2013.

Now, this is one of those slippery – and potentially toxic – topics where someone ends up getting pissed off by whatever I say next. But, hey, it’s Thanksgiving season, the Arctic blast has arrived 3 months early, and someone’s likely to get pissed off anyway…

Actually, this is a topic I have much to say about, and maybe even more questions than answers. For instance, why is so much of the spoofing / layering litigation on the futures side? (Is there no spoofing in equities? Or, just harder to find?) And, why does it take so long? We’re nearly six years past 2013…

But, as a reminder from a recent Feed post, “A Brawl Breaks Out in the Futures Market – Part 2,” Alphacution presents the estimated trading gains segmented by between futures and equities for Latour Trading, LLC, the market-making arm of TRC – and the likely source of the activities in question:

Now, based on the available data, the figures above represent estimated total trading gains of $3.1 billion for the 9 years beginning 2010 and ending 2018 for the market making arm of TRC, which does not include the prop trading arm, TRC Investments, LLC; an entity where we currently don’t have enough data to develop a credible estimate for their trading gains.

And so, I can’t help but wonder: At ~2% of aggregate estimated trading gains, is $67.4 million – an impressive victory for the regulators – supposed to be a deterrent?

By | 2020-03-02T17:05:43-05:00 November 14th, 2019|Alphacution Feed|

About the Author:

Paul Rowady is the Director of Research for Alphacution Research Conservatory, a research and strategic advisory platform uniquely focused on modeling and benchmarking the impacts of technology on global financial markets and the businesses of trading, asset management and banking. He is a 30-year veteran of the proprietary, quantitative and derivatives trading arenas. Contact:; Follow: @alphacution.