Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080

Commodity Futures Trading Commission

Office of Public Affairs

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

www.cftc.gov

Interpretive Guidance and Policy Statement on Disruptive Practices

Interpretive Guidance and Policy Statement on Disruptive Practices

Section 747 of the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Commodity 

Exchange Act to expressly prohibit certain disruptive trading practices. Specifically, CEA section 4c(a)(5) states that 

it shall be unlawful for any person to engage in any trading, practice, or conduct on or subject to the rules of a 

registered entity that:

(A) Violates bids or offers;

(B) Demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing 

period; or

(C) Is, is of the character of, or is commonly known to the trade as, ‘spoofing’ (bidding or offering with the 

intent to cancel the bid or offer before execution).

The Commission is issuing this Interpretive Guidance and Policy Statement to provide market participants and the 

public with guidance on the scope and application of the statutory prohibitions set forth in CEA section 4c(a)(5). 

In accordance with the statutory language of CEA section 4c(a)(5), the Commission interprets CEA section 4c(a)(5) 

to apply to any trading, practices or conduct on a registered entity such as a DCM or SEF.

As a general matter, the Commission interprets CEA section 4c(a)(5)(A) as prohibiting a person from buying a 

contract on a registered entity at a price that is higher than the lowest available price offered for such contract or 

selling a contract on a registered entity at a price that is lower than the highest available price bid for such contract. 

The Commission interprets CEA section 4c(a)(5)(A) as a per se offense. With respect to SEFs, CEA section 

4c(a)(5)(A) will only be applicable when a person is using a SEF’s “order book.” 

The Commission interprets the prohibition in CEA section 4c(a)(5)(B) to apply to any trading, conduct, or practices 

occurring within the closing period that demonstrates an intentional or reckless disregard for the orderly execution 

of transactions during the closing period. The Commission believes that conduct outside the closing period may 

also disrupt the orderly execution of transactions during the closing period and may thus form the basis of a 

violation under CEA section 4c(a)(5)(B) and any other applicable CEA sections. For example, a CEA section 

4c(a)(5)(B) violation may occur when a market participant accumulates a large position in a product or contract in 

the period immediately preceding the closing period with the intent (or reckless disregard) to disrupt the orderly 

execution of transactions during that product’s, or a similar product’s, defined closing period. The Commission 

further clarifies that CEA section 4c(a)(5)(B) violations may include not only executed orders by market participants 

that disrupt the orderly execution of transactions during the closing period, but also any bids and offers submitted 

by market participants that disrupt the orderly execution of transactions during the closing period. The 

Commission interprets that Congress’s inclusion of a scienter requirement in CEA section 4c(a)(5)(B) to mean that 

accidental, or even negligent, trading, practices, or conduct will not be a sufficient basis for the Commission to 

claim a violation under CEA section 4c(a)(5)(B). 
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080

A section 4c(a)(5)(C) violation occurs when the trader intends to cancel a bid or offer before execution. CEA 

section 4c(a)(5)(C) “spoofing” prohibition covers bid and offer activity on all products traded on all registered 

entities, including DCMs and SEFs. “Spoofing” includes, but is not limited to: (i) submitting or cancelling bids or 

offers to overload the quotation system of a registered entity, (ii) submitting or cancelling bids or offers to delay 

another person’s execution of trades, (iii) submitting or cancelling multiple bids or offers to create an appearance of 

false market depth, and (iv) submitting or canceling bids or offers with intent to create artificial price movements 

upwards or downwards. The Commission further interprets the CEA section 4c(a)(5)(C) prohibition to include all 

bids and offers in pre-open periods or during other exchange-controlled trading halts. The Commission interprets 

that a CEA section 4c(a)(5)(C) violation requires a market participant to act with some degree of intent, or scienter, 

beyond recklessness to engage in the “spoofing” trading practices prohibited by CEA section 4c(a)(5)(C). Because 

CEA section 4c(a)(5)(C) requires that a person intend to cancel a bid or offer before execution, the Commission 

believes that reckless trading, practices, or conduct will not constitute a “spoofing” violation.