Regulatory Roundup: A Legacy of Integrity: The CFTC’s Evolution in Market Surveillance

The CFTC was established in 1974 as an independent agency to regulate the futures and options markets. Before its creation, regulation of these markets was fragmented and inconsistent, with various state and federal agencies overseeing different aspects of trading. The CFTC was tasked with ensuring market integrity, protecting market participants from fraud and manipulation and promoting fair competition. Given the nature of its mandate, the agency has always taken a more dynamic, proactive approach; focusing on market integrity, trading behavior, industry engagement and data-driven decision-making. 
 

Its first major case, the Hunt Brothers Silver Manipulation, set the tone for the agency an remains an interesting case today. In the late 1970s, the Hunt Brothers, Texas oil billionaires, bought massive amounts of physical silver while simultaneously taking giant leveraged positions in silver futures on COMEX and CBOT. At their peak, they controlled nearly half of the world’s deliverable supply of silver. This concentrated control pushed silver prices from $6 per ounce to $50 per ounce. This is a price it has never seen again in the past 50 years. 
 

The CFTC launched an investigation into the Hunts for a manipulation scheme known as “cornering the market.” By controlling a dominant share of the available supply, the manipulators create artificial scarcity, which is the part of the scheme known as the “corner.” What typically follows is the “squeeze,” where buyers are forced to purchase at inflated prices. If those buyers are forced to buy to cover short positions, then it is known as a “short squeeze.” Notably, a “corner” isn’t always necessary to create a “squeeze.”

Cornering a market is extremely risky for the manipulator, and this case shows why. As concerns grew, exchanges raised margin requirements and imposed position limits. The Hunts lost control, and silver prices collapsed on what became known as “Silver Thursday.” The brothers were hit with a $100 million margin call, the largest of their time, and eventually lost $1.7 billion (over $5 billion in today’s dollars).

The collapse didn’t just impact silver; it destabilized futures markets and threatened the overall stability of the U.S. financial system. The sheer size of the margin call endangered clearinghouses and banks. The CFTC ultimately charged the Hunts with attempted manipulation of silver markets, and they were banned from trading, paid large fines and eventually went bankrupt.

This was a seminal case for the young agency, proving its critical role in safeguarding the U.S. financial system and shaping its method of operation to this day. Today’s extensive programs on position limit reporting, large trader reporting and continuous market surveillance trace directly back to the lessons learned from the Hunt Brothers case. 

On the enforcement side, the case helped establish the legal standard for market manipulation. The brothers were charged with attempted manipulation of silver futures markets, and crucially, the law does not require that the scheme be successful. The CFTC was also able to demonstrate both the intent and the artificial pricing effect through the brothers’ trading behavior alone by taking into account a combination of their position size, accumulation of physical silver, extreme leverage, and overall market impact.  
 

Nearly 50 years later, the CFTC is facing a new set of challenges. Its remit now spans a diverse range of emerging assets and trading models, most notably crypto and digital assets. But that’s not the only fast-growing market the agency must address—we’re also in the midst of an explosive growth in prediction markets and event contracts, many of which will fall under the CFTC’s oversight. These developments come on top of ongoing trends the agency has already been monitoring, such as the growth of high-speed and algorithmic activity, 24/7 trading, the use of AI in financial markets, new products like weather derivatives and the increasing interconnectedness of the trading landscape.

Many of these new challenges echo those of the past, but their pace, scale and complexity are distinctly modern. The CFTC’s recent decision to upgrade its capabilities with Nasdaq Market Surveillance is a major step toward ensuring both the integrity and vibrancy of U.S. financial markets. 

27 August 2025: The CFTC is deploying Nasdaq’s industry-leading suite of surveillance technology, which will provide automated alerts and cross-market analytics to better protect markets from fraud, manipulation, and abuse, replacing the agency’s legacy system and supporting its mission to promote market integrity.

21 August 2025: The U.S. Securities and Exchange Commission (SEC) appointed Judge Margaret Ryan as Director of the Division of Enforcement, effective September 2, 2025, to lead efforts against securities fraud and manipulation.

21 August 2025: The U.K. Financial Conduct Authority (FCA) reviewed a sample of principal trading firms and found that while most principal trading firms have improved governance and controls, oversight of algorithmic trading still varies widely—especially in compliance involvement, testing and market abuse surveillance.

14 August 2025: The Hong Kong Securities and Futures Commission (SFC) and Hong Kong Monetary Authority (HKMA) issued a joint statement warning investors about abrupt market movements driven by speculation around stablecoin licensing, emphasizing the need for caution, thorough research and responsible communication to safeguard market integrity.

13 August 2025: SEBI proposed reforms to broker regulations, including tighter controls on algorithmic and proprietary trading, and eliminating outdated investor classifications.

12 August 2025: SEBI released its annual report showing a sharp rise in insider trading investigations and enhanced surveillance capabilities using advanced analytics. The regulator also launched a Market Intelligence Portal for confidential tips.

7 August 2025: The FCA concluded a review into off-channel communications, finding firms had improved surveillance and policy updates. Enhancements included monitoring emojis, voice notes and channel hopping.

4 August 2025: The CFTC launched a public consultation to allow spot crypto asset trading on registered futures exchanges.

1 August 2025: The SEC launched an AI Task Force to drive responsible AI integration across the agency, enhance operational efficiency and support innovation through cross-disciplinary collaboration.

1 August 2025: The Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey emphasized early fraud detection and criticized gatekeepers for lax compliance.  

1 August 2025: The FCA announced that retail investors will soon gain access to crypto-linked exchange traded notes (cETNs), provided they are traded on FCA-approved U.K. exchanges.

30 July 2025: South Korea’s Financial Services Commission (FSC), Financial Supervisory Service (FSS), and Korea Exchange launched a joint response team to combat stock market manipulation. The initiative includes AI-powered surveillance and unified jurisdictional coordination.
 

• The Australian Securities and Investments Commission (ASIC) charged a former investment manager with insider trading after he accessed confidential emails about a takeover and traded $2.6 million in Platinum Asset Management shares, marking the first outcome from ASIC’s new criminal investigation taskforce.
• South Korea’s former First Lady was arrested for stock manipulation and bribery, accused of rigging Deutsch Motors shares and accepting luxury gifts from the Unification Church. Prosecutors estimate illicit gains of over 800 million won (~$577,940).
• The SEC settled spoofing charges against a trader, who manipulated thinly traded options using fake orders and concealed his actions from his firm. The trader agreed to pay over $350,000 in penalties and disgorgement.
• The Ontario Securities Commission (OSC) sentenced an individual to jail and fined him $1.4 million for insider trading using unpublished press releases accessed through his role as a software developer. The individual executed over 400 trades and earned $770,000 in illicit gains.
• The Monetary Authority of Singapore (MAS) charged Eurosports Global CEO  with multiple offenses including false trading and deceptive practices. Goh allegedly used nominee accounts to create misleading market activity
• The Financial Industry Regulatory Authority (FINRA) initiated disciplinary proceedings against an ex-Merrill Lynch broker for unauthorized trading and refusing to cooperate with investigations. The ex-broker allegedly made impermissible recommendations and used his personal email for firm business.
• SEBI barred Decipher Labs and its promoters for insider trading and misleading announcements, including false claims of investments from Facebook and Tata. Executives sold shares at inflated prices before a 36% drop.
• The FCA fined Sigma Broking £1.1 million for submitting nearly 1 million incorrect transaction reports over five years, citing systemic weaknesses in reporting controls.
• SEBI fined 11 individuals ₹3.87 crore for orchestrating a Telegram-based pump-and-dump scheme in Darshan Orna shares, involving coordinated trading and misleading hype. The operation boosted the share price by nearly 90% before strategic exits.
• The SEC charged two Brooklyn men with insider trading for allegedly using confidential information obtained through their roles at a public filings firm to trade stocks of clients, generating over $2 million in illicit profits. 
   

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