Sometime head feints are acceptable; sometimes they are felonies.
“Citi to Pay Fine Over ‘Spoofing’ Tactics,” The Wall Street Journal, January 20, 2017 B12. Traders entered large orders, intending to immediately cancel them, hoping thereby to fool the market. This has been against the law since 2010. Cost: $25 million in fines.
The supervisors of the traders were accused of failing to supervise. Scolding, but not reporting, the offending trader was not sufficient. Unclear whether the supervisors will themselves be prosecuted.
What does it say about governance when the people responsible for making sure traders operate legally aren’t penalized when the traders stray? Perhaps if the government or the company penalized the supervisors (or their supervisors), the traders and others would get the compliance message. Citi paid the fine, but the Citi shareholders bear the costs.