SINGAPORE – Two men were jailed on Monday (Oct 7) for “spoofing” the Singapore derivatives market in 2015 and 2016, and providing false information to the Singapore Exchange (SGX) to cover their tracks.
Spoofing typically involves an errant trader submitting orders he does not intend to fulfil before cancelling them, to create a false impression of supply and demand. Concurrently, he enters a small number of genuine orders to trade at a more favourable price.
Jimmy Ng Kian Bin, 36, who was jailed for 16 weeks, was found to have placed 10,436 orders on several occasions in 2015. Of these, 9,477 were deleted entirely, the court heard, and 34 orders were partially filled before they were deleted.
Erik Ng Song Hann, 49, adopted a similar method in 2016 and was sentenced to four weeks’ jail on Monday.
Both men were traders at Joerik Financial, where Erik Ng was also a director. Another director, Joseph Chai Ming Leong, 42, was said to have conspired with them to give false information to SGX Derivatives Trading.
Jimmy Ng made an estimated profit of $30,000, while Erik Ng gained US$1,830 (S$2,525), said Deputy Public Prosecutor Kevin Yong.
In particular, Jimmy Ng’s “deceptive trading activities” were said to have caused GSA Capital Partners losses of US$5,000. It made a complaint to the SGX in 2015.
On Monday, Jimmy Ng pleaded guilty to employing a scheme to defraud other market participants by “simultaneously entering and deleting a series of buy orders… to create the illusion of buying interest” in the SGX MSCI Singapore Index Futures July 2015 contract. This was to induce other market participants to enter buy orders to meet sell orders placed by him.
He applied the same strategy by placing and deleting a series of sell orders to induce others to meet buy orders that he placed. The acts were done on two instances in July 2015. Two other charges were taken into consideration.
Erik Ng was found to have employed a similar method in August 2016 on the SGX MSCI Taiwan Index July 2016 Futures and August 2016 Futures.
When SGX sent a query to Joerik’s broker, UOB Bullion and Futures, about the unusual trading activities, Jimmy Ng, with the help of Erik Ng and Chai, prepared a reply claiming he was testing a trading algorithm and the intention was for orders to be filled continuously as long as there was an open interest in the market, court documents showed.
Erik Ng, with the alleged help of Chai, also gave a false statement to the authorities saying he was doing arbitrage trading.
In mitigation, defence lawyer Wong Shi Yun of Rajah & Tann said that the profit in Erik Ng’s case was a small sum. In both men’s cases, there was also “no significant market impact as a result of the trades they had carried out”.
She added that when Jimmy Ng was carrying out the trades, there was no clear standard set out in relation to such activities, and that detailed guidance was released only later.
But District Judge Ong Hian Sun ruled that the custodial threshold had been crossed in both cases.
This is the first case under the joint investigations arrangement between the Monetary Authority of Singapore and the police’s Commercial Affairs Department where the authorities prosecute cases over the use of deceptive devices in futures contracts, as well as giving false statements to the SGX.