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

Mr Sheth addressed some of his Lone Large Orders in his witness statement.

On 21 June 2016, Mr Sheth placed a large order to sell 500 lots for 141.10 at 16.56.04, which he cancelled seven seconds later. Then, 49 seconds later, he placed another large order to sell 500 lots for 141.09, which was also live for seven seconds before being cancelled. In his witness statement he identified an RFQ from Method Investments which had been received at 16.56.50 for a sell-side order of €1.5m of a six-year bond and suggested this might have prompted him to deploy the Information Discovery Strategy, and that the sales team might have had advance notice of this RFQ (hence why the Futures orders preceded the timestamp on the RFQ).

This RFQ had traded away. Method Investments subsequently came back with another RFQ on the same side. Mr Shivji submitted that this was at the end of the day, and it might be hard to reverse out of the position without making a loss.

Mr Sheth identified a large order to buy 500 lots at 16.45.37 on 28 June 2016 (which is the same date as F158). The order was live for two seconds. Having reviewed the data, he believed two events may have triggered him to use the Information Discovery Strategy:

Mr Shivji submitted that this was conjecture about the long delay. The RFQ from Method Investments was for a May 2021 bond, ie with less than five years’ maturity, which had a Futures equivalent of about two lots – the large order was 250 times this size, so he would have been assuming Method Investments was splitting €325m elsewhere. Mr Shivji emphasised that the order was live for two seconds, and that this cannot have been long enough to test whether Method Investments was splitting its order. Mr Sheth suggested in cross-examination that he may have cancelled the order after two seconds if his cash hedge had disappeared.

On 30 June 2016 Mr Sheth placed a large order at 12.42.55 to buy 500 lots for 142.28, cancelled the order after 24 seconds and then placed another large order for 142.30 and subsequently cancelled that order after ten seconds. He identified an RFQ which had been received by the Desk at 12.39.24, from Banca IMI SPA for a quote for a €500,000 buy-side order of a 30-year bond and said that the length of this bond meant it would require nearly 500 lots to hedge. The RFQ is noted as “dealer time out”, ie MHI did not provide a price. Mr Sheth accepted in cross-examination that this bond would in fact only require about ten lots to hedge.

For the Lone Large Orders placed by both Mr Lopez and Mr Sheth, the Tribunal agrees with Mr Shivji that the explanations are no better than those for the Large Orders in the Instance Pool. However, this does not necessarily operate in favour of the Authority – a poorly thought through and applied strategy is not abusive if there was an intention to trade. What is more significant, at least for Mr Lopez, is the number of the Lone Large Orders. We agree with the Authority that only three of the five Lone Large Orders were not placed in the same second as a small order being filled, and that he is therefore relying on the existence of three out of 88 large orders to support his position that they were not placed to facilitate the execution of a small order on the other side. Mr Sheth placed a greater number, 14 Lone Large Orders out of 202 large orders (bearing in mind that these 202 large orders include all of the Multiple Large Orders).