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

The Authority’s pleaded case is in relation to the placing of the Large Orders in the Instance Pool; those Large Orders are said to have been placed to facilitate the execution of the Small Orders. The Traders have criticised the Authority throughout for not taking account of their full trading activity in the Relevant Period, ie the activity outside the Instance Pool which includes the placing of Non-Instance large orders (including the Lone Large Orders). This submission needs to be considered in context. The sizing used for the categorisation of orders as being large or small (or “Large” or “Small” if within the Instance Pool) means that, when taken together, they capture all of the orders placed by the Traders during the Relevant Period. To put this another way, there is no category of “medium-sized” orders in Futures for this purpose.

The Large Orders and the Non-Instance large orders are all the orders of 200 lots or more placed by Mr Lopez, or 250 lots or more placed by Mr Urra and Mr Sheth (except where they placed orders in Multi Trader Instances in which case the lower threshold of 200 lots was applied) in the Relevant Period. Where we have referred to the execution rates of such orders placed by the Traders in comparison with those of other market participants, where other market participants placed 2,406 large orders of 200 lots or more, 72.28% of which fully traded, this is a comparison being drawn with all of the Traders’ orders of such size in the Relevant Period. Only six of Mr Urra’s 175 large orders traded (five in part and one in full); and none of Mr Lopez’s 88 large orders or Mr Sheth’s 202 large orders traded at all.

The small orders (including the Small Orders) placed by all three Traders were sized by reference to the market making business which the Desk was actually doing. They were (partial) hedges for cash trades (recognising that Futures were not a perfect offsetting hedge to a cash trade) and/or re-positioning the Traders’ books.

We have concluded that the Large Orders were each likely to give the impression or signal of significantly increased supply or demand, and the most likely market reaction would be for the market to move in the opposite direction to the Large Orders, ie towards the Small Orders. We found that a Trader placing the Large Order in these circumstances would have known of this likelihood.

On the basis of the trading activity in the Instances, in particular the overlap between the Small Orders and the Large Orders, the length of time for which the Large Orders were live and the timing of the cancellation of the Large Orders after the Small Orders filled, the Tribunal accepts that it could reasonably be inferred that the Large Orders were placed to facilitate the execution of the Small Orders.

However, there are aspects of the trading activity during the Relevant Period which the Authority’s case does not explain, including the Lone Large Orders and the Overlapping Small Orders. This activity could be consistent with the Trading Strategies as put forward by the Traders.

We have throughout sought to assess the plausibility of the explanations which have been put forward by Mr Urra, Mr Sheth and Mr Lopez and the Authority by reference to all of the evidence which is available and taking account of the information that is no longer available.