A former chief investment officer at a London hedge fund has been hit with a £100,000 fine and a ban from all regulated activity by the UK regulator for market abuse.
Furthermore, the action may lead to greater scrutiny on trading intermediaries and service providers in terms of their own responsibility to monitor their clients’ trading activity.
The Financial Conduct Authority (FCA) found Corraddo Abbattista, formerly of Fenician Capital Management, guilty of creating a false impression of equity demand and supply which he did not intend to execute, a tactic known as spoofing.
On “multiple occasions” between January and May in 2017, Abbattista placed large orders for contracts for difference which, the FCA said, he had no intention of executing. At the same time he placed smaller orders on the opposite side of the order book which he did intend to execute.
The FCA ruled that Abbattista was aware that this was market manipulation but “recklessly went ahead with those actions anyway”.
Mark Steward, executive director of enforcement and market oversight, said: "Market manipulation is corrosive of market integrity, undermining clean, efficient and fair markets. The FCA has increased its capability to detect and take robust action against the harm to shareholder value caused by such abuse."
The action is the regulator’s first under the EU’s Market Abuse Outcome which went live in July 2016.
The FCA’s annual report shows that as of March 31 this year, there were 29 market manipulation cases open, so it is possible that more cases will follow.
The FCA may also choose to take a closer look at the role and responsibilities of intermediaries, according to Nick Bayley, managing director and head of UK regulatory consulting at financial advisory firm Duff & Phelps.
Bayley referred to the role of the unnamed direct market access (DMA) provider involved in the trades that would have used its electronic trading facilities to enable investors to interact with an exchange’s order book.
“It’s interesting to speculate whether the role of the unnamed direct market access provider has also been scrutinised by the FCA,” said Bayley.
“Although the primary responsibility to prevent and detect manipulative strategies sits with the buy-side firm itself, the DMA provider would also have had sufficient information to identify the manipulative trading by its client,” he added.
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