UT (Tax & Chancery) UT-2022-000134 UT-2022-000135 UT-2022-000137 - [2025] UKUT 00214 (TCC)

The Authority’s position is that the Traders were collaborating in real-time, in person, during the Instances to commit an abusive scheme, and, in the Multi Trader Instances, this involved updating each other on the progress of trading of the Small Order (including not trading or going slowly) and giving sufficient information for the other Trader(s) to place a Large Order in the opposite direction, and then confirming once the Small Order had filled (or mostly filled) at which point the other Trader(s) would cancel the Large Order(s).

The Traders did not share a common blotter, so if one Trader was placing a Small Order and another Trader was going to place a Large Order in the opposite direction to facilitate the execution of the Small Order, they would need to be told the direction in which to place the Large Order, when to do so and when to cancel (even on the assumption that pricing and the nudging of the Large Order closer to the touch were decisions taken alone by the Trader placing that Large Order).

We heard evidence from the Traders as to how they worked together on the Desk, during the course of which, as well as denying that they were collaborating on an abusive scheme, they each gave evidence that they did not discuss their specific trading activity with each other:

We have found that there is no documentary, electronic communications or witness evidence of the Traders collaborating to commit market abuse. Indeed, the Tribunal considers that the evidence goes beyond this (negative) finding:

The Authority submits that this absence of evidence is unsurprising – there was no need for the Traders, who sat next to each other, to document their plan, the acts required to instruct each other to place and cancel orders at particular prices and times would have sounded like ordinary trading activity, and Mr Hill and Mr Barouti were focused on their own trading. Further, and in contrast to the Traders’ denial of any form of collaboration (even about what was agreed to be genuine trading activity) Mr Shivji submitted that there would be reasons to have specific conversations of the type that is denied by the Traders about particular trading – avoiding the risk of errors (by inadvertently trading with each other on the Exchange or breaching the Desk’s limits), when hedging for each other, and the responsibility of Mr Urra and Mr Lopez to supervise when they delegated tasks to Mr Sheth. Mr Shivji also relied on the activity and the coincidences of timing in the Multi Trader Instances themselves.

On the basis of all the evidence, the Tribunal concludes that the Traders were understating the extent to which they did work together and communicate in relation to specific trading activity:

In addition, we find that Mr Sheth’s evidence was inconsistent in its approach as to the level of communication on the Desk. His evidence was that if his Large Order had traded, he would have tried to manage it himself first for a few seconds, then sought the assistance of Mr Urra to exit the position. But he also said that not only did he not discuss his use of the Information Discovery Strategy with Mr Urra in relation to particular clients, but that he did not check with Mr Urra whether it would be a good time to try using the strategy, ie whether Mr Urra would be available to assist. This seems to present a difficult scenario, particularly where the Tribunal can see the level of activity on the Desk in short bursts of time and that there were occasions where Mr Lopez and/or Mr Sheth were hedging for Mr Urra yet somehow Mr Sheth was expecting that Mr Urra would have time to assist. We do accept that the size of the Large Orders and the risks to the Desk, proportionate to the size of the Desk’s usual business, means that Mr Urra would have assisted; but consider it surprising that Mr Sheth would have proceeded on such a basis.

We find that the Traders would have been able to carry out the abusive scheme alleged by the Authority in person. We agree with the Authority that, once the Traders came up with a plan (which was in essence very straightforward), they would be able to give any instructions and share information quickly in person in real time; that Mr Urra sat in between Mr Lopez and Mr Sheth would not preclude such coordination between Mr Lopez and Mr Sheth in Multi Trader Instances which did not include orders being placed by Mr Urra (eg F94 and F174) in circumstances where Mr Urra was aware of the abusive scheme. The question is whether or not they did.

Mr Shivji drew attention – both in his submissions and during cross-examination of the Traders – to the occasions on which the Traders placed, amended or cancelled Large Orders so close in time to the activity of another Trader as to be “virtually simultaneous”. The Traders said this was not a coincidence, as it was driven by market information. Mr Shivji submitted that this was no explanation at all – on the Traders’ cases, they were pursuing different strategies, prompted (they say) by completely different triggers and with different aims.

The Tribunal addresses here the activity in the Multi Trader Instances relied upon by the Authority as Specified Instances. The Traders say these are not multi trader instances at all, on the basis that (as we have found) there is no common blotter showing live orders on the Exchange, and (the Traders submit) the Traders were not collaborating and therefore did not know of the orders being placed by another Trader.

We set out below the orders placed by the Traders in the Multi Trader Instances: