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

Reactions to the Eurex Letter

Reactions to the Eurex Letter

417.

Each of the Traders has described the Eurex Letter as being about the placing of Multiple Large Orders by Mr Sheth:

(1)

Mr Urra was shown the Eurex Letter by Compliance in the meeting on 29 July 2016. His evidence was that the letter raised a concern over market manipulation and that the trading activity identified involved both Mr Sheth and Mr Lopez. However, he said the issue raised by Eurex was the placing of multiple overlapping orders by Mr Sheth on these two occasions and, in cross-examination said he had immediately checked the market to look for market impact and then spoke to Mr Sheth but was reluctant to accept that he would also have spoken to Mr Lopez at that time.

(2)

Mr Lopez’s evidence was that Mr Urra spoke to him about this letter at the end of July; that Mr Urra suggested that the issue involved Mr Sheth only; and that Mr Urra did not give him the impression that it was a very serious matter or that there was any sense of urgency.

(3)

Mr Sheth’s evidence was that his understanding was that the Eurex Letter concerned his multiple orders.

418.

We find that Mr Lopez and Mr Sheth were first told of the Eurex Letter by Mr Urra, and may not have seen it at the end of July 2016. However, even if they had not previously seen or been given a copy, it was attached to the MHI Compliance Report (which they received in October 2016).

419.

All three Traders maintained these explanations in their evidence, namely that the Eurex Letter was about multiple overlapping orders, rather than a large order opposite a small order where the large order is cancelled after the small order trades.

420.

The Tribunal finds that it is clear from the Eurex Letter itself that the questions being raised were not confined to multiple orders but about “bid orders with a high volume” whilst trading on the ask side, and the letter expressly referred to deleting the bid orders without execution. Each of the Traders should have known this as soon as they saw a copy of the Eurex Letter; it is apparent from not only the description of the trading activity but also from question 3 asked by the Exchange.

421.

We do not accept Mr George’s submission that Mr Urra’s understanding (or that of the other Traders) was reasonable, or that it was shared by others at the time. MHI’s response to MSUSA on 22 August 2016 sets out an explanation of the bid orders as being used to establish a basis/curve position for some size and to understand the depth and direction of the market, and addresses why they were placed about the same time as the ask orders. There is then a separate explanation of “why such large multiple orders were placed on 29 June 2016” by reference to a trader having intended to amend the price. It is clear from this response, which was signed by Mr Joshi and had been seen in draft by Mr Heiberg, that MHI understood that it was being asked not just about the placing of multiple orders but about large orders opposite a smaller order where the large order was cancelled. The Tribunal considers that Mr Joshi and Mr Heiberg did not take a different position when interviewed by the Authority in 2017.

422.

The refusal of Mr Urra, Mr Lopez and Mr Sheth to acknowledge the scope of the enquiry raised by the Exchange, even in cross-examination at the hearing, is difficult to understand.