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

BTP Futures were the fifth and sixth most traded interest rate derivatives (out of 32) on the Eurex Exchange in June and July 2016 respectively. The Tribunal notes that there is a huge range, and volumes plummet within the “top 10” in both months. The most traded derivatives were Euro-Bund Futures, at 19,253,830 contracts in June 2016, with BTP Futures then at 3,399,472, and the shorter term BTP futures (in 10^th) at 932,524. The shape of the “top 10” is similar for July 2016, with Euro-Bund Futures at 11,203,674, BTP Futures at 1,567,151 and shorter term BTP futures at 380,380.

This data shows the difference in traded volumes in Futures between June and July 2016 – June was the month with the highest traded volumes for 2016, and July was second lowest (behind August). The picture had been similar in 2015, with traded volumes of 3,191,548 in June and 1,633,723 in July. The Tribunal finds that this significant difference between traded volumes in June and July 2016 was broadly predictable.

Mr Kasapis conducted an exercise of comparing the volatility of Futures traded in the Relevant Period with two other timeframes - the Eurozone debt crisis (2010 to 2012) and the Italian Sovereign Bond crisis (May 2018). Volatility in Futures prices in the Relevant Period was said to be low compared to these two periods, which was said to be consistent with the principle that a market’s liquidity has a significant, inverse, impact on price volatility – lower liquidity usually results in a more volatile market and causes prices to gap, higher liquidity usually creates a steadier less volatile market in which prices fluctuate in smaller amounts.

Mr Kasapis set out his opinion that “Consequently, the ideal conditions to manipulate a market such as the BTP futures market would be a period of high volatility and intermittent low liquidity (an environment of relatively few buy and sell orders).” The Tribunal accepts this proposition. However, we do not consider that this assists with considering whether the Large Orders were likely to have a market impact in the Relevant Period.

Mr Kasapis had criticised Mr Creaturo for comparing the liquidity of Futures to US Treasuries and Bund futures saying that this was a “false comparison” but had then engaged in a similar comparison himself by reference to other futures traded on Eurex. The short point is that these analyses of relative traded volumes between different futures contracts or between different time frames are of little assistance when considering the actual liquidity of the Futures market at the times of the Instances. As Mr Kasapis accepted, what matters is the “actual liquidity that you can capture”.