A high-frequency trader has been accused of manipulating
the Chicago Mercantile Exchange to pocket $1.5 million.
Michael Coscia, 52, is the first person to face charges arising from
high-frequency trading.
"Traders and investors deserve a level playing
field," U.S. Attorney for Northern Illinois Zachary Fardon said in a
statement announcing the indictment by a grand jury in Chicago.
The investigators say Coscia made his money by placing
orders for commodities that he owned, orders that prompted the price to rise.
Then he would quickly sell his holdings at the higher
price and then cancel the orders he placed.
Cancellation of the orders prompted
prices to decline.
His trades took only fractions of a second to complete.
The practice of high-frequency trading is examined in a
book, Flash Boys, by Michael Lewis.
It’s a Canadian, Brad Katsuyama, working for Royal Bank in New York, that
provided Lewis with insights into how high-frequency traders make millions at
the expense of ordinary investors and hedgers.
