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

Monitoring of activity

Monitoring of activity

215.

There were various levels of monitoring which applied during the Relevant Period:

(1)

MHI monitored (and recorded) electronic messages and telephone communications of all traders on the trading floor, including the Traders.

(2)

MHI monitored and maintained records of trades executed by the Traders on Eurex.

(3)

Mr Heiberg had access to the Desk’s “live positions”, ie executed trades, throughout the day using a “Bento” app. He would check these positions throughout the day, and he would receive alerts to exposures. Such exposures would include the situation where a cash trade was executed and the risk was not hedged immediately.

(4)

The Desk’s overnight positions were monitored by Mr Heiberg and by Compliance to check that the Desk’s book was within its limits.

216.

MHI did not monitor orders in Futures placed on Eurex; the monitoring tool used at that time, TransWatch, did not handle transactions in Futures. Orders (and cancellations) were monitored by MSUSA, as described in the MHI Compliance Report:

“The Compliance function conducts transaction and communications surveillance, in accordance with a risk based approach, as the second line of defence function responsible for monitoring market conduct.
An enhanced market abuse monitoring system (Trading Hub) was selected in 2015 and is in the process of being fully implemented;
At the time at which the order placing and cancellation practices described above were taking place, neither the Front Office nor Compliance were able to monitor such activity, as orders were routed through MSUSA and MHI maintained records of trades executed, but not orders. Orders were being monitored by MSUSA. Arrangements are currently underway to ensure that Eurex orders are captured within Trading Hub.”

217.

No alerts or questions were sent by MSUSA to MHI in respect of the Traders’ activity in the Relevant Period.

218.

Each of the Traders expected and understood that their communications and online activities would be monitored and recorded by MHI. The Traders expected and understood that their trading on Eurex would be monitored by the Exchange, and that other market participants may flag to the Exchange any behaviour which they considered to be of concern.

219.

The Tribunal finds that the Traders did not know the specifics of the monitoring that was conducted by MHI, save that they were aware that Mr Heiberg had access to their live positions throughout the day and that, as limits applied at the end of the day, Compliance would have access to their positions at the end of the day. That the Traders would not have known the specifics of the monitoring was clear not only from the evidence of the Traders, but is reflected in Mr Heiberg’s explanation of the monitoring to the Authority, where he explained the process of introducing “Trading Hub” as a replacement tool for TransWatch, as he himself had little visibility into the exact configuration of the systems, and no details of exactly what they could monitor, making the point (also reflected by Mr Urra) that it probably makes sense that the people being monitored don’t have a “perfect understanding” of how the monitoring operates.

220.

The Tribunal finds that the Traders did not, at the beginning of the Relevant Period, know that orders in Futures were not being monitored by MHI.