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

Placing of new Large Orders shortly after cancellation and switching of sides

Placing of new Large Orders shortly after cancellation and switching of sides

515.

The Tribunal has considered the activity of Mr Urra and Mr Sheth in sequential Instances that are in close proximity in time to each other, and within Instances where multiple Large Orders were placed that were not concurrent. Both Mr Urra and Mr Sheth gave evidence that the Large Orders were placed pursuant to the Information Discovery Strategy, and that the timing of the cancellation of the Large Orders may have been driven by events in the market in relation to which there is no longer information available.

516.

The Tribunal focused on the Specified Instances, but did also look at the Instance Pool as a whole (alongside the data in relation to cash bond transactions, Electronic RFQs and daily price graphs) to see whether the activity might provide some support for the position being put forward by Mr Urra and Mr Sheth.

517.

From the very beginning of the Relevant Period, Mr Urra would place a Large Order, decide to cancel then place a new Large Order shortly afterwards. As noted above, there is no evidence in relation to market events, but there is evidence of pricing (from both the daily price graph and the Spread graph during each Instance).

(1)

F1 and F2 took place on 7 June 2016. Mr Urra placed a Large Order to sell 444 lots for 141.09 at 8.56.00.393, and cancelled that order at 8.56.06.604. Mr Urra then placed a Large Order to sell 490 lots for the same price at 8.56.45.116, cancelling it at 8.56.47.206. The orders were live for 6.211 seconds and 2.09 seconds respectively. Mr Urra’s case is that on two occasions within 30 seconds of each other there were two cash market actions which led him to place an offer in the Futures market in anticipation of a trade hedge being entered by a Posited Trader, who would then execute in the Futures market to the gain of Mr Urra’s Large Orders; and it was a coincidence of timing that on both occasions Mr Urra, having placed his Large Order shortly after Mr Lopez placed a Small Order in the opposite direction, cancelled his Large Order within two seconds of the Small Order being filled.

(2)

F79 and F80 took place on 20 June 2016. Both of these Instances involved Mr Lopez placing a Small Order on the buy-side. During the course of these two Instances, Mr Sheth placed three Large Orders, each to sell 500 lots at 140.86. They were not concurrent – the first was placed at 9.57.32.754 and cancelled at 9.57.44.609, the second was placed at 9.57.53.165 and cancelled at 9.58.00.899, with the third placed at 9.58.09.700 and cancelled at 9.58.12.174. In isolation, it is difficult for the Tribunal to conceive of a legitimate strategy that, within the space of 40 seconds, would see the same order, at the same price, placed and cancelled three times. The timing instead appears to be linked to the placing and filling of Mr Lopez’s Small Orders.

518.

We were frequently referred to F176, in which Mr Sheth placed a total of seven Large Orders (all in the same direction). He cancelled his sixth (and at that time final) Large Order to buy 500 lots at 15.31.16.40, less than three seconds after his Small Order of 80 lots filled. However, he then placed another Large Order to buy 500 lots at 15.31.37.500. That seventh Large Order was live for less than two seconds. It had been placed almost four seconds after he had placed a second Small Order to sell ten lots, and was cancelled 1.73 seconds after the second Small Order filled.

519.

Both Mr Urra and Mr Sheth placed Large Orders in different directions within a short period of time:

(1)

F15 is an Instance to which Mr Urra referred in his witness statement. It is a long Instance, taking place over 40 minutes. However, within that time Mr Urra placed a Large Order to sell 450 lots for 141.72 at 16.01.05.469, cancelled it at 16.01.08.667, then placed a Large Order to buy 444 lots for 141.72 at 16.03.44.664, which he cancelled at 16.03.46.655. Mr Urra’s third Large Order in this Instance is a Large Order to sell 444 lots at 141.64, but that is placed 17 minutes later. All three of these Large Orders overlapped with, and were in the opposite direction from, a Small Order. However, at the beginning of the Instance Mr Urra had placed two Small Orders, each to buy ten lots, which remained live until the very end of the Instance and were therefore on the same side as his second Large Order. This is unexplained.

(2)

In F158 Mr Sheth placed a Small Order to sell 17 lots, then placed two Large Orders to buy 500 lots (at 14.54.25.109 and 14.54.27.450), the Small Order traded, he cancelled the two Large Orders and then he placed a Small Order to buy 17 lots and two Large Orders to sell 500 lots (at 14.54.49.370 and 14.54.50.550), which were then cancelled after the Small Order filled. (Mr Sheth identified that the first Small Order would have been a hedge for a cash trade with ICBC, and that it was this cash trade that triggered him to deploy the strategy.) The cancellation of the Large Order closest to the touch was on both occasions within two seconds of the Small Order being filled.