A trader with Chicago-based Great Point Capital agreed to settle FINRA charges he made undisclosed trading profits by manipulating the market price of a Nasdaq security.  Robert Bunda allegedly engaged in manipulative trading activity - including spoofing - and tried to conceal his improper trading activity by using any of his 11 undisclosed outside brokerage accounts.

"Spoofing" involves placing small limit orders at prices that improve the NBBO for a security, allowing the trader to take advantage of the improved prices by executing larger orders at another firm that offers execution guarantees at the NBBO.  Once the larger order is executed at the artificially inflated price, the trader cancels the initial limit orders.   N.B.  The spoofing activity below was referred to FINRA by Nasdaq's MarketWatch Dept.

FINRA's Allegations.   Bunda worked at Great Point Capital for 8 years, starting in July 2003.  Over the first 5 years, he opened and/or had control over at least 11 securities accounts with 4 brokerage firms.  Prior to opening 5 of those accounts and/or placing initial orders Bunda failed to provide written notification to his employer (about the outside brokerage accounts) or to the carrying broker (that he was associated with an NASD member firm).  The other 6 accounts had been opened before Bunda joined Great Point - and he didn't promptly tell his new employer about those accounts, either;  nor did he tell the carrying brokers he was now associated with Great Point.  Bunda's new account documentation sometimes noted that he was a student or was self-employed. 

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Bunda allegedly allegedly entered over 4,000 small share orders through his in-house trading account at Great Point to improve the NBBO for a Nasdaq security.  After the market moved, he placed a significantly larger order on the opposite side of the market with one of the 11 undisclosed personal brokerage accounts.  After receiving the beneficial execution, Bunda cancelled a majority of the market moving orders he had entered through Great Point's trading account.  All told, Bunda bought and sold shares pursuant to this spoofing strategy 433 times, generating personal gains of $172,000. 

Bunda's AWC mentions specific instances of manipulation:  Over the course of 4 days - November 21, 22, 24, 27, 2006, Bunda knowingly and intentionally entered 4,303 priced limit orders to buy (sell) a small number of shares of The Advisory Board ("ABCO"), a Nasdaq NMS stock, through his trading account at his employer, Great Point, at prices that he knew would improve, and were intended to improve, the NBBO in ABCO - i.e., the "market moving orders."   After receiving a beneficial execution for his personal account, Bunda intentionally and knowingly cancelled (or partially cancelled) 2,713 of the 4,303
market moving orders that he had entered to improve the NBBO.

The AWC details numerous other instances of manipulation involving other stocks.  For further details, go to:   [FINRA AWC 20QfinfWlfi7i-ni for CRD No. 4298940].

Agreed Upon Sanctions.   Bunda accepted a 16-month suspension, a $175K fine, $172K in restitution to parties identified by FINRA.   [FINRA News Release, 8/18/11]