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

Risk of detection

Risk of detection

706.

Mr George submitted that the alleged abusive scheme would have been easily detected.

707.

We have found that:

(1)

The Desk was located in an open-plan working environment, and conversations between the Traders could be overheard.

(2)

Each of the Traders expected and understood that their communications and online activities would be monitored and recorded by MHI and that their trading would be monitored by the Exchange.

(3)

The Traders did not know the specifics of the monitoring that was conducted by MHI, save that they were aware that Mr Heiberg had access to their live positions throughout the day and that, as limits applied at the end of the day, Compliance would have access to their positions at the end of the day.

(4)

The Traders did not, at the beginning of the Relevant Period, know that orders in Futures were not being monitored by MHI.

708.

Whilst the Relevant Period started on 1 June 2016, the first Instance was not until 7 June 2016 – there were seven Instances that day. On that single day, Mr Urra placed seven Large Orders of between 400 and 490 lots, and Mr Lopez placed one Large Order of 300 lots, which was concurrent with a Large Order of 444 lots which had been placed by Mr Urra. None of these orders filled, and all were cancelled. No questions were asked by Mr Heiberg, Compliance did not request an explanation, and there was no immediate challenge from the Exchange. The pattern of activity continued that week, with a further eight Instances the following day (although those Instances only involved Mr Urra’s trading activity).

709.

As a matter of fact, we do not agree with Mr George’s submission that this alleged abusive scheme would have been easily detected as the reality is that it was not. The Eurex Letter is dated 26 July 2016 and related to two Instances of trading which had taken place on 29 June 2016, both of which had involved the Multiple Large Orders placed by Mr Sheth. It was the various investigations prompted by the Eurex Letter that resulted in the identification of the Instance Pool.

710.

The Tribunal considers that this raises a question as to what the Traders can be inferred to have learnt about the monitoring during the course of June 2016 in any event. We found that the Traders did not, at the beginning of the Relevant Period, know that orders in Futures were not being monitored by MHI. We consider it would have been reasonable for Mr Urra to have concluded, by the end of 10 June 2016 (at which point 33 Instances had occurred) that MHI and the Exchange were not monitoring, or flagging as potentially abusive, the placing and cancellation of orders of less than 500 lots.

711.

When we look at the size of the Large Orders, Mr Urra generally placed Large Orders of 400 to 499 lots (with one Large Order of 500 lots), most of Mr Lopez’s Large Orders were of 200 lots, and most of Mr Sheth’s Large Orders were of 500 lots. None of the Large Orders were for more than 500 lots. There were a number of Instances involving concurrent Large Orders, of 800 to 1,000 lots (with some of the Multiple Large Orders resulting in volumes of up to 2,000 lots).