ICE Takes Aim at ‘Disruptive Trading Practices'

ICE released an FAQ as to what entails disruptive trading, but the gist is that they are outlawing strategies specifically designed to mislead other traders. A prime example, according to ICE, would be entering a trade with the intent to cancel the order before execution.

From a press release, these now-illegal practices also include:

1. Entering an order or market message, or cause an order or market message to be entered, with:

(A) The intent to cancel the order before execution, or modify the order to avoid execution;

(B) The intent to overload, delay, or disrupt the systems of the Exchange or other market participants;

(C) The intent to disrupt the orderly conduct of trading, the fair execution of transactions or mislead other market participants, or

(D) Reckless disregard for the adverse impact of the order or market message.

2. Knowingly entering any bid or offer for the purpose of making a market price which does not reflect the true state of the market, or knowingly entering, or causing to be entered, bids or offers other than in good faith.

These rules will go into effect on January 14, 2015.

According to the Financial Times, ICE is following the CME Group's lead, which established similar rules four months ago, as it tries to balance mandates established under the Dodd-Frank Act and the Commodity Futures Trading Commission (CFTC) to ban spoofing and other misleading trading practices while not scaring away proprietary traders, who some argue add volume and liquidity to the market.