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

The Authority submitted that Mr Lopez’s failure to achieve any sort of anticipatory hedge in this period is inconsistent with a genuine desire to do so. On his case, he placed 88 large orders over the Relevant Period pursuant to this strategy and none of them traded. 55 of these were Large Orders within the Instance Pool, and five of them were Lone Large Orders.

Mr Creaturo regarded this as a significant point in determining whether Mr Lopez’s trading activity was consistent with his alleged Anticipatory Hedging Strategy. He said that if he was managing a trader in that position, he would have encouraged them to be more aggressive – iceberg the order, try smaller, nudge the order closer to the touch, keep the order on for longer – and put the trade on. Mr Jaffey put it to Mr Creaturo that such an approach would have involved greater risk, but Mr Creaturo’s answer to this was that Mr Lopez’s starting point was that he was at the support level he had identified.

The Tribunal accepts Mr Creaturo’s evidence that Mr Lopez’s failure to execute any of the Large Orders (or any of the other large orders he placed) is significant. We recognise that the Large Orders were placed away from the touch and therefore less likely to execute. However, as referred to by Mr Creaturo, Mr Lopez’s evidence was that he was carefully analysing all available market information, including the Bund/Futures spread and pricing levels in the Futures, trying to identify support and resistance levels, yet took an “all or nothing” approach to his Large Orders. He explained why he did not iceberg them; but when they were repeatedly not executing, he not only did not adjust the price (which may in particular Instances be explained by his determinations on support and resistance levels) but did not place an order in a smaller size, or place an order of 200 lots but iceberged to, say, 25, to see if he could get any of it filled. We note in this regard that Mr Lopez did place some Large Orders for more than 200 lots, generally earlier in the Instance Pool – it was no part of his evidence that the reduction in size was to try to get the orders done; instead he referred to his greater risk appetite at the beginning of June and that 200 lots was sufficient size for the medium-sized RFQs.

Furthermore, the outcome of none of these Large Orders trading contrasts with his approach elsewhere, in particular his decisions as to purchases of cash bonds on his own initiative:

Mr Lopez was thus actively taking positions, albeit in much smaller sizes, based on his views of client flow at the relevant time; yet whilst relying on the same conclusions as to client buying interest as the reason for placing his Large Orders he did not execute any of them.