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

Anticipatory hedging can be a legitimate trading strategy. However, the Anticipatory Hedging Strategy as explained by Mr Lopez involves taking directional risk based on what Mr Lopez says were predictable patterns of RFQs in circumstances where those RFQs were a small part of the Desk’s market making business and where, although they were fairly regular, they were not predictable in timing. The result would have been to take directional risk, albeit of a size that would not, viewing each Large Order on its own, breach the Desk’s limits, where Mr Lopez’s trading activity was otherwise very precise, with adjustments frequently being made by a single lot order. As a strategy it is at odds with both MHI’s business and Mr Lopez’s own approach to managing the risk on his book. These features mean that whilst the Tribunal considers that the Anticipatory Hedging Strategy could in theory be plausible, there are reasons to doubt that Mr Lopez would have been pursuing such a strategy.