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

The review conducted by MHI was based on a limited range of trading data (the two Instances identified by Eurex and five further (randomly selected) days in the Relevant Period), the interviews with the Traders described above were the only meetings between the Traders and Compliance before MHI produced its report and MHI did not have the benefit of expert evidence.

It is not clear to us that, at the time of this report, the Traders had explained and/or Compliance had identified that the Traders were providing two different explanations for their trading. The report sets out, at section 4.1, what is said to be Mr Urra’s explanation – referring to large orders being to establish a basis position at an attractive price and price discovery (albeit with no reference to client splitting). The first time anticipatory hedging is mentioned is when the report addresses the Mandate (as the Mandate contains its own description of anticipatory hedging) and says (at section 6.2) that “The large futures orders, to the extent that these were placed with a view to establishing a hedge against expected near term customer trades or to establish a basis position for future sale to clients, would fall into the category of “anticipatory hedging”, and are permitted by the Desk’s mandate.” The report later refers (in section 7.2.3) to Mr Urra’s explanation, and includes that the Desk may have been used by clients to execute only a portion of their cash trades. There is no specific reference to Mr Lopez or to a different explanation for the trading.

The conclusions reached by Compliance are in any event far from a vindication of the trading activity. The report refers to “sufficient doubt” as to the Traders’ explanations, which left open the possibility that the trading could be regarded as abusive and expressed its overall conclusion as “indeterminate”.