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

F84 at 11.24.53.106 on 20 June 2016

F84 at 11.24.53.106 on 20 June 2016

650.

The activity involves all three Traders, but it is only Mr Urra who placed a Large Order (of 490 lots).

651.

Mr Lopez and Mr Sheth had placed Small Orders in this Instance. We find that both of the Small Orders were a hedge for Mr Urra’s book. Mr Lopez had accepted this (putting it forward as the likely explanation in his witness statement); Mr Sheth said it is possible that the Small Order was a hedge for a Spanish bond or could have represented him rebalancing the risk on the book generally, but on the basis of the evidence of recent cash trades and the size of the Small Orders, we conclude that Mr Urra had asked Mr Sheth to place this hedge. Both of the Small Orders were placed at Best Offer.

652.

The Instance length was 26 seconds; and the Instance involved a large number of transactions.

(1)

Mr Sheth placed a Small Order to sell 200 lots for 141.22, iceberged to 25, at 11.24.53.106.

(2)

Mr Lopez placed a Small Order to sell 55 lots for 141.22, iceberged to six, at 11.25.02.342.

(3)

Both of these Small Orders started to trade.

(4)

At 11.25.07.805 Mr Urra placed a Large Order to buy 490 lots for 141.20. (This was one tick from Best Bid.)

(5)

The Small Orders continued trading. There were no price adjustments. Mr Sheth’s Small Order filled at 11.25.13.231 and Mr Lopez’s Small Order filled at 11.25.18.120.

(6)

Mr Urra cancelled his Large Order at 11.25.19.341.

653.

Mr Shivji submitted that collaboration between the Traders explains the timing of the cancellation of Mr Urra’s Large Order, and why Mr Lopez and Mr Sheth did not cross the spread and hit Mr Urra’s bid (which was only two ticks away from their orders).

654.

On the basis of this trading activity:

(1)

Mr Lopez and Mr Sheth had both placed Small Orders to sell at 141.22 to hedge for Mr Urra’s book. This price was Best Offer, and both of these orders were already trading. (Mr Lopez’s Small Order filled in about 16 seconds, and Mr Sheth’s in 20 seconds.)

(2)

If the Traders were collaborating in an abusive scheme in this Instance, Mr Lopez and/or Mr Sheth would need to have told Mr Urra that the trading had stalled. They would not need to have told him direction, as he would have known this on the basis of his own cash trade. Yet this is then a situation in which Mr Urra had asked Mr Lopez and Mr Sheth to hedge for his book, we infer on the basis that he was busy, but Mr Urra nevertheless was at his desk and had time to assist with the abusive strategy by placing a Large Order.

(3)

Mr Urra’s Large Order was one tick away from Best Bid, ie just two ticks away from the Small Orders. The Small Orders were for a total of 255 lots. The Replay graph shows there were only about five lots visible at Best Bid, and then about 100 lots visible ahead of Mr Urra’s Large Order one tick away. If Mr Lopez had crossed the spread to get the hedge done, there is a real risk that he would have hit Mr Urra’s bid (depending on the invisible liquidity at the touch).

(4)

The Large Order was live for 11.536 seconds, and cancelled within 1.221 seconds of the Small Orders filling.