Upper Tribunal Tax and Chancery Chamber

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

Fecha: 31-Ene-2025

F30 at 17.39.34.225 and F31 at 17.45.10.137 on 10 June 2016

F30 at 17.39.34.225 and F31 at 17.45.10.137 on 10 June 2016

642.

F30 and F31 involved Mr Urra and Mr Lopez. The Authority’s case was that in F30 Mr Urra had placed a Large Order to help facilitate the trading of Mr Lopez’s Small Order, was “caught out” when 39 lots of his Large Order traded, then tried to sell those lots unsuccessfully. Mr Urra then tried again to sell those lots, with them being the Small Order in F31, at which point Mr Lopez had helped by placing a Large Order.

643.

The Tribunal was repeatedly referred to these two Instances, including in the context of the time of day at which the Large Orders were placed, that Mr Urra’s Large Order started to fill in F30 and he cancelled it and immediately tried to sell the 39 lots he had acquired, and the coincidences in timing.

644.

The only Large Order in F30 was placed by Mr Urra. The trading activity was as follows:

(1)

At 17.39.34.225, Mr Urra placed a Small Order to sell nine lots, iceberged to five, for 141.92.

(2)

That did not trade, and at 17.39.45.444 Mr Urra placed a Large Order to buy 500 lots for 141.89.

(3)

The Small Order filled.

(4)

At 17.39.54.403, Mr Lopez then placed a Small Order to sell five lots, iceberged to one, for 141.93.

(5)

Mr Urra amended the price of his Large Order, increasing it to 141.90, and then increasing it further to 141.91 at 17.39.56.110.

(6)

Mr Lopez’s Small Order filled at 17.39.59.350.

(7)

Mr Urra reduced the price of his Large Order to 141.90 at 17.39.59.393, 0.043 seconds after Mr Lopez’s Small Order filled.

(8)

39 lots of Mr Urra’s Large Order traded, and he cancelled the remaining 461 lots at 17.40.01.104.

(9)

At 17.40.26.885 Mr Urra placed an order to sell 39 lots for 141.91, reduced the price to 141.90 and then cancelled the order.

645.

Mr Shivji submitted that:

(1)

Mr Urra had not intended to buy Futures at this time of day – having placed an order to buy 500 lots, he cancelled that order as soon as it started to trade and then placed an order to sell the 39 lots which had traded in that Instance; and

(2)

Mr Urra’s amendments to the price of his Large Order, moving it away from the touch as soon as the Small Order traded, must have been coordinated.

646.

Mr Urra and Mr Lopez denied any collaboration - Mr Urra’s evidence was that something was happening in the market here, and Mr Lopez said all he could see was his Small Order to sell five lots and he could not see Mr Urra’s activity.

647.

F31 then started at 17.45.10.137 and involved Mr Urra placing a Small Order (to sell the 39 lots from F30), with Mr Urra and Mr Lopez both placing Large Orders (of 499 and 400 lots respectively). It was a long instance, of 9 minutes and 50 seconds. The trading activity was as follows:

(1)

At 17.45.10.137 Mr Urra placed a Small Order to sell 39 lots, iceberged to four, for 141.93.

(2)

Mr Urra placed a Large Order to buy 499 lots at 141.80 nearly 12 seconds later. Mr Urra adjusted the price of this Large Order to 141.82, 141.83, 141.84, then back down to 141.83, 141.82, 141.81 then 141.80. These price changes take place across 27 seconds.

(3)

At 17.46.21.136 Mr Lopez then placed a Large Order to buy 400 lots for 141.84.

(4)

Less than 20 seconds later, Mr Urra amended the price of his Small Order, to 141.92 then 141.91. The second price reduction is at 17.46.40.705.

(5)

At 17.46.45.359 Mr Urra then started a series of amendments to the price of his Large Order, to 141.81 and up to 141.88 and then reducing back to 141.81, all in increments of 0.01.

(6)

At 17.47.17.885 Mr Lopez increased the price of his Large Order to 141.85 and then to 141.86 almost eight seconds later.

(7)

The following second Mr Urra then started to amend the price of his Large Order again, to 141.82, 141.83, 141.84 and then 141.85.

(8)

The Small Order started to trade at 17.47.33.255 at the price of 141.91.

(9)

At 17.47.39.633 Mr Urra amended the price of the remaining 15 lots of the Small Order to 141.92.

(10)

Less than two seconds later Mr Urra started amending the price of his Large Order, increasing it to 141.86, 141.87, 141.88, 141.89, 141.90 and then back to 141.89.

(11)

The Small Order started to trade again.

(12)

Mr Urra continued reducing the price of the Large Order, to 141.88, 141.87, 141.86, 141.85 and 141.84.

(13)

Mr Urra reduced the price of the Small Order, which continued to fill, and at 17.48.11.360 the final three lots of the Small Order were placed on the market.

(14)

Mr Lopez and Mr Urra cancelled their Large Orders at 17.48.12.755 and 17.48.12.890 respectively.

(15)

Mr Urra increased the price of his Small Order and it filled at 17.55.00.136.

648.

Mr Urra and Mr Lopez denied collaborating, with their evidence being that they had each placed their Large Orders for their own Trading Strategies, they did want to trade their Large Orders, with Mr Lopez adding that something was going on in the market, and it may have been linked to an OECD report.

649.

The Tribunal records that:

(1)

Mr Urra and Mr Lopez were, on their account, pursuing different Trading Strategies. Mr Lopez was placing orders with the aim of predicting MHI’s client flow, whereas Mr Urra was going against MHI’s client flow in anticipation that the market maker with whom the client had traded would then be selling Futures. Yet the pursuit of these different strategies led to them both placing Large Orders in the market in the same direction at the same time.

(2)

The price adjustments to Mr Urra’s Large Order were not keeping the order at a certain level away from the touch; he was moving the Large Order towards it and then away again, with the “peak” getting closer to the touch each time.

(3)

The result of this activity was that at 17.48 on a Friday evening the Desk had orders in the market for 899 lots. There was very little visible volume on the Replay graphs, particularly on the buy-side. On the basis of all of the evidence before us, we do not accept that Mr Lopez could reasonably have expected that he would win a cash trade of €40-50m of ten-year bonds at this time of day; or that Mr Urra could reasonably have anticipated that another market maker would be needing to sell a large number of Futures following a cash trade.

(4)

If Mr Lopez had bought 400 lots at this price, he would have been sitting on a loss of €112,000 on Monday morning’s opening.

(5)

The two Large Orders were cancelled 0.135 seconds apart.