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

There are different ways in which concurrent Large Orders appear in the Instance Pool:

The Tribunal considers that all three of these variations present somewhat inconsistent possibilities, even before we consider in more detail Mr Sheth’s explanation for the Multiple Large Orders.

The placing of concurrent Large Orders by a single Trader (including Mr Sheth’s Multiple Large Orders) could support the Authority’s position that the Traders were applying increasing pressure to the order book according to the levels of supply and demand needed to be shown at a particular time (a submission that was also made by Mr Shivji when explaining that, contrary to Mr Jaffey’s submissions in relation to the size of Mr Lopez’s Large Orders, the Authority did not accept that an order of 200 lots would always be sufficient to facilitate the execution of a Small Order but it depended on price and the total volume of lots being placed). However, if there was an abusive scheme, and its operation required more than one Large Order to be placed, it is not clear why these would then be placed by different Traders, ie why Mr Urra and Mr Sheth would both be placing Large Orders, rather than one of them simply placing more than one Large Order. Yet if Mr Urra and Mr Sheth were pursuing an Information Discovery Strategy, and they say they were not coordinating or discussing their activity during an Instance, they were pursuing it rather ineptly if they both decided to test the theory of a client splitting an order at the same time without telling each other (whether before, during or afterwards). It is notable that there are concurrent Large Orders involving all three Traders, including Mr Lopez, who on his account was pursuing a different strategy and yet was doing the same thing by placing Large Orders in the same direction and very close in time to Mr Urra and Mr Sheth.

The Multiple Large Orders are the overlapping Large Orders which were placed by Mr Sheth in a single Instance, eg in F103 on 21 June 2016 (which was the first date on which he placed Multiple Large Orders) he placed a Large Order to sell 500 lots for 141.14 at 16.29.57.570, cancelled it, then placed a Large Order to sell 500 lots for 141.13 at 16.31.33.702, with his next action being to place another Large Order to sell 500 lots for 141.12 at 16.31.37.776.

Mr Sheth’s evidence was that the Multiple Large Orders were “poor practice” and a mistake, arising as a result of his inexperience and lack of training in operating Bloomberg Escalator, and arose where he wanted to amend the price of his Large Order. The details of his explanation are considered further below.

The MHI Compliance Report had concluded that this was “poor practice”, and Mr Heiberg had described Mr Sheth’s explanation as a “plausible explanation” in his interview with the Authority.

In its Amended Statement of Case for Mr Sheth at [64] the Authority’s position was “Mr Sheth has also suggested that in some cases, where he placed multiple, overlapping Large Orders, these were in fact intended to be amendments to an existing Large Order. Whether or not this is true does not affect the Authority’s assessment of the purpose of the placement of a Large Order on the opposite side of the order book to a small order.” At the hearing Mr Shivji set out the Authority’s position that it did not accept that these subsequent Large Orders were a mistake, or anything other than deliberate behaviour.

In support of Mr Sheth’s position, Mr Bailin submitted that the placing of Multiple Large Orders only served to draw attention to the trading activity during the Relevant Period. This could be seen in, eg F176, one of the Instances questioned by the Exchange, where Mr Sheth placed a total of seven Large Orders and at one point four of them were on the market at one tick intervals, thus showing a total of 2,000 lots on the buy-side.

Mr Sheth has consistently described these Multiple Large Orders as being a mistake, from the first time he was interviewed by Compliance. He said he wanted to amend the price of his Large Order and move it closer to the touch.

Mr Sheth acknowledged that he did know a way to amend the price of a Large Order within Escalator, but described the relevant steps as “slow and cumbersome”, and that in a dynamic trading environment it was far quicker to place a new Large Order. That Mr Sheth knew how to amend the price is clear from F103 itself, as Mr Sheth had amended the price of the Small Order before placing the first Large Order in that Instance. Mr Sheth had initially explained that he forgot to cancel the original order and did not intend to have more than one Large Order in the market at any point; but at the hearing he explained that in his mind the primary focus was the order at the best price, and he considered that the market would not get to his earlier Large Orders which were further away from the touch. His own explanation also makes it clear that he knew that he had not cancelled the first Large Order before placing the second at a better price. The different behaviours are also illustrated in F103, where he cancelled the first Large Order before placing the second, but did not cancel the second before placing the third. Mr Sheth’s focus on the order closest to the touch was then illustrated by his consistency in the order of cancellation of the Large Orders in the Instances involving Multiple Large Orders, as he cancelled that which was closest to the touch first.

The difficulties we have with the terminology of mistake are:

The result of these actions, and even based on Mr Sheth’s own evidence, is that at the time he placed the second (and subsequent) concurrent Large Orders in any Instance (and this would be the placing of the third Large Order in F103) he no longer had an intention to trade the previous Large Orders which had been placed and not cancelled (this would be the second Large Order in F103).

The Tribunal considers the issue to be better described as whether this was poor practice (rather than a mistake) or Mr Sheth deliberately increasing the number of lots on the order book to apply further pressure on the book. We accept that placing a new order rather than amending an existing order could be the poor practice of a kind a more junior trader might make.

Mr Bailin submitted that these Multiple Large Orders are potentially significant:

The Tribunal is not persuaded that the Multiple Large Orders placed by Mr Sheth should necessarily be assessed entirely separately from the other Large Orders. Mr Urra had also placed concurrent Large Orders within an Instance, and amended the price of his Large Orders closer to the touch.