U.S. futures regulators are looking into whether high-speed traders indulged in "wash trading," a strategy in which they improperly buy and sell futures contracts without taking a position in the market, the Wall Street Journal reported, citing people familiar with the probes.
The Commodity Futures Trading Commission (CFTC) is investigating suspected wash trades by high-speed firms in futures contracts tied to crude oil, precious metals, agricultural commodities and the Standard & Poor's 500 stock index, among other underlying instruments, the people told the Journal.
Wash trades are banned under U.S. futures law.
Investigators also are looking at the two primary exchange operators that handle such trades, CME Group Inc and IntercontinentalExchange Inc, the paper reported.
Regulators are concerned the exchange systems are not sophisticated enough to flag or stop wash trades, the people said. (link.reuters.com/fyc76t)
"We actively enforce rules prohibiting wash trading, and we are in the process of developing technology to prevent wash trades as prohibited by CME and CFTC at the trading-engine level," a CME spokeswoman told the Journal.
CME plans to introduce new technology in the middle of this year, she said.
An ICE spokeswoman told the newspaper that the exchange operator has employed wash-trade filters for years, and "we continue to enhance them."
Neither CME not ICE would discuss details of communications with regulators about their filters. No exchange operator has been accused of wrongdoing, according to the Journal.
None of the parties were immediately available for comment by Reuters outside of regular U.S. business hours.