BofA Securities, Inc.
BofA Securities, Inc. was fined $24 million for engaging in more than 700 instances of spoofing through two former traders in U.S. Treasury secondary markets and related supervisory failures spanning more than six years.
Spoofing is a type of fraudulent trading that involves the use of non–bona fide orders (orders that the trader does not intend to have executed) to create a false appearance of market activity on one side of the market to induce other market participants to execute against bona fide orders entered on the opposite side of the market. Spoofing may deceive other market participants into trading at a time, price or quantity that they otherwise would not have.
From October 2014 through February 2021, BofA Securities, through a former supervisor and a former junior trader, engaged in 717 instances of spoofing in a U.S. Treasury security to induce opposite-side executions in the same Treasury security or a correlated Treasury futures contract.
From at least October 2014 through September 2022, BofA Securities failed to establish and maintain a supervisory system reasonably designed to detect spoofing in U.S. Treasury markets. BofA Securities did not have a supervisory system to detect spoofing in Treasuries until November 2015; until mid-2019, that system was deficient in that it was designed to detect spoofing by trading algorithms, not manual spoofing by its traders, like the 717 instances addressed in the settlement.
In addition, until at least December 2020, BofA Securities’ surveillance did not capture orders its traders entered into certain systems provided by external venues.
Lastly, BofA Securities did not supervise for potential cross-product spoofing in Treasuries through September 2022.
