The safety of investing in physical gold and silver through bullion and coin purchases, as opposed to futures contracts, is highlighted by the Commodity Futures Trading Commission’s sweeping action against three leading international banks. Germany’s Deutsche Bank, Switzerland’s UBS, and Hong Kong’s HSBC all settled charges that they engaged in efforts to manipulate the U.S. precious metals futures markets through “spoofing” schemes. Spoofing is an effort to fool traders by engaging in the illegal practice of entering large buy or sell orders in an effort to push markets up or down, only to later cancel the orders. The short-term effort at manipulation has no impact on the physical bullion and coin markets.
Deutsche Bank agreed to pay a fine of $30 million for engaging in futures manipulation schemes from 2008 through 2014. UBS settled charges by paying $15 million for spoofing efforts between 2008 and 2013. HSBC paid a far smaller fine of $1.6 million, reflecting its cooperation with the CFTC’s Division of Enforcement. The commodity futures regulatory body announced the settlements on January 29.
“Spoofing is a particularly pernicious example of bad actors seeking to manipulate the market through the abuse of technology. The technological developments that enabled electronic and algorithmic trading have created new opportunities in our markets,” said CFTC Division of Enforcement Director James McDonald. “These cases should send a strong signal that we at the CFTC are committed to identifying individuals responsible for unlawful activity and holding them accountable.”