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

Mr Urra’s evidence was that all of his large orders, including the Large Orders, were placed in pursuit of the Information Discovery Strategy.

The Tribunal had some difficulties with accepting the credibility of Mr Urra’s evidence as a witness. We considered that his explanations in relation to the questions raised by the Eurex Letter (and in particular his insistence that it was about the Multiple Large Orders which had been placed by Mr Sheth) and his account of the steps he took immediately after receiving it (namely speaking to Mr Sheth but being reluctant to accept that he would have spoken to Mr Lopez, whose trading activity had also been expressly identified in the Eurex Letter albeit by trader code rather than by name) were not credible.

The Tribunal has concluded that the Information Discovery Strategy put forward by Mr Urra as the explanation for the Large Orders was not plausible. We do not accept that either of the two “benefits” of the strategy were likely to be achieved. Mr Urra was an experienced and successful trader. For this reason we are satisfied that Mr Urra knew this, and do not accept that Mr Urra would have designed such a strategy, pursued it himself or encouraged others to pursue it. We considered it notable that the evidence before the Tribunal of the two occasions on which Mr Urra had had “success” in his placing of large orders, namely where they traded in full, was provided by Mr Sheth (in respect of the large order for 450 lots in May 2016) and Mr Kasapis (in respect of the Non-Instance large order) yet Mr Urra gave no evidence of the information which had been discovered on either of these occasions.

Furthermore, we are not persuaded that such a strategy, even if it were being pursued, could explain his trading activity in the Instance Pool. By way of example:

The timing of the activity in the Multi Trader Instances strongly supports a conclusion of collaboration with both Mr Lopez and Mr Sheth. This could clearly be seen in F30 and F31 (with Mr Lopez) where in F30 Mr Urra moved the price of his Large Order away from the touch at almost exactly the same time as Mr Lopez’s Small Order filled, and in F31 he and Mr Lopez (who were, on their accounts, pursuing different strategies) had Large Orders in the market in the same direction at the same time, cancelling them 0.135 seconds apart. In F84, the two Small Orders (placed by Mr Lopez and Mr Sheth) were hedges for Mr Urra’s book, and they were selling a total of 255 lots (in two Small Orders, both of which were iceberged). Mr Urra’s Large Order was one tick away from Best Bid, was live for 11.536 seconds and cancelled 1.221 seconds after the Small Orders filled.

Mr Bailin submitted that the placing of Multiple Large Orders in Multi Trader Instances was supportive of the Traders’ position that they were not pursuing an abusive strategy, as those orders only served to draw attention to the trading and, if the Traders were collaborating, would have been seen by Mr Urra and Mr Lopez who would have told Mr Sheth of his error. In F121, the Instance to which we were referred which involved Large Orders being placed by both Mr Sheth and Mr Urra, whilst Mr Sheth placed a total of six Large Orders during the course of the Instance, each of which were for 400 lots, only two were ever live concurrently. Indeed, the activity in that Instance involved Mr Sheth placing a Small Order to buy 22 lots and then, after six seconds, a Large Order to sell 400 lots, which was then followed by Mr Urra placing a Large Order to sell 450 lots and Mr Sheth placing a second Large Order to sell 400 lots. These three Large Orders were then cancelled (and Mr Urra’s trading did not feature again in this Instance). Mr Sheth then amended the price of his Small Order and placed four further Large Orders later in that Instance. Although we considered this to be an intriguing submission, ultimately we are not persuaded that it bears the weight which the Traders sought to attach thereto. Mr Urra had also placed concurrent Large Orders, and two of Mr Sheth’s Large Orders being live concurrently was not inconsistent with Mr Urra’s own trading.

Whilst Mr George submitted that Mr Kasapis’s Market Trend Analysis showed that in 70% of Specified Instances the market was moving towards Mr Urra’s Small Order, and Mr Urra’s Small Order was already trading in some of the Instances (including the Specified Instances), such that there would be no need to take steps to facilitate the execution of these orders, let alone commit market abuse to do so, we are not persuaded that the position is as strong in favour of the timely execution of the Small Orders:

Mr Urra’s experience meant he would have known the potential significance of the decision as to whether (and to what level) to iceberg orders that he wanted to trade. This was also evident from his trading activity. His placing of the Small Orders shows the decisions he made – he placed Small Orders of 25, 73 and 90 lots that were not iceberged (in F232, F12, F150 respectively). By contrast, in F31 he iceberged his Small Order of 39 lots to four, in F152 he iceberged his Small Order of 33 lots to nine and in F194 he iceberged a Small Order of 25 to four. He adapted his actions to the market and his priorities at the relevant time and knew the likely effects of showing size to other market participants.

We do not consider that the three Instances (F32, F86 and F170) where Mr Urra amended the price of his Large Order after the Small Order filled are of particular assistance. In F32 the price amendment was made 0.026 seconds after the Small Order filled, ie so close as to be regarded as the same time as the Small Order (which had been placed by Mr Urra) filled. In F86 and F170 the price was amended 1.018 and 0.559 seconds after the Small Order filled. In all three Instances, the Large Order remained live at the amended price for less than three seconds before being cancelled.

Mr George submitted that the Authority’s case was itself not plausible. We have assessed these submissions above. In particular, Mr George submitted that Mr Urra was a successful trader, who had recently been promoted to Head of European Rates Trading and would have no reason to pursue an abusive strategy. We do not agree – Mr Urra was a successful, well-remunerated trader who was responsible for managing the Desk and improving performance, and we do not find it incomprehensible that he may have considered pursuing a strategy which involved committing market abuse to ensure he continued with his success. This would particularly be the case if he considered his actions would be unlikely to be detected. Here, the placing of Large Orders at the beginning of June 2016 without questions being raised by MHI or the Exchange could have given him comfort that Futures orders of 500 lots which were placed and cancelled without execution were not being flagged by the monitoring tools.

Furthermore, we were troubled by Mr Urra’s apparent lack of regard for the specific requirements of the Desk’s Mandate, notwithstanding that this Mandate was required by the Volcker Rule and in circumstances where, as Desk Head, he was responsible for the Desk’s adherence to the Mandate (and had signed it). There can be no doubt that he would have known its importance.

The Tribunal does agree with Mr George that there are difficulties with the Authority’s case:

Assessing all of the evidence, the Tribunal has concluded that notwithstanding these difficulties with the Authority’s case, they are not fatal and they are heavily outweighed by the evidence in favour of the Authority. The Tribunal concludes that the Authority has established that:

The Tribunal concludes that this conduct amounted to market abuse within s118(1) FSMA 2000 and market manipulation within Article 15 of the Market Abuse Regulation.

On the basis of our conclusions as to Mr Urra’s actual knowledge and intentions, the Tribunal finds that his conduct was dishonest by ordinary standards.