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Regulator goes public with plans to fine trading platform £8m

Regulator goes public with plans to fine trading platform £8m

The Financial Services Authority (FSA) has published a decision notice indicating that it plans to fine Canadian trading platform Swift Trade for manipulative trading on the London Stock Exchange.

The FSA accused non-authorised Swift Trade of ‘systematically and deliberately’ engaging in manipulative trading to cause a number of small price movements on a large number of shares listed on the London Stock Exchange. The matter has been referred to the Upper Tribunal which may support or cancel the FSA’s decision.

The market abuse was widespread and involved tens of thousands of trading order placed by individuals traders, who sometimes acted in concert, according to the FSA. The regulator estimated that Swift Trade made profits in excess of £1.75 million from this form of market abuse, known as layering.

The FSA claimed that Swift Trade refined its trading activity to avoid detection after the London Stock Exchange (LSE) raised concerns about layering in March 2007. Traders involved in layering place large orders on one side of the LSE then trade on the opposite side of the order to take advantage of the shift in price, before rapidly deleting the large buy order.  Swift Trade said it would impose controls over its trading but changed its direct market access provider in order to avoid regulatory scrutiny, according to the FSA.

‘The FSA remains committed to tackling abuse of the UK markets - wherever it originates. Interference with the price formation process threatens the integrity of those markets,’ said Tracey McDermott, acting FSA director of enforcement and financial crime. ‘Market participants who offer direct market access should be aware of the risks that such access may be abused and take proactive steps to prevent it.’

New Model Adviser® revealed that the regulator planned to take action against Swift Trade earlier this month. Swift Trade and its president Peter Beck applied for a judicial review of the FSA's plans to publish a decision notice on the firm, until the High Court dismissed his application for an interim injunction on 26 August. Swift Trade was dissolved in December 2010 after changing its name to 7722656 Canada Inc and its assets were transferred to a former holding company, BRMS Holdings.

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