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FCA bans & fines trader for QE gilt price manipulation

by Dylan Lobo on Mar 20, 2014 at 11:22

* Between 09:00 and 14:30 on 10 October Stevenson significantly increased his holding of the relevant gilt – which accounted for 92% of the gilt’s turnover that day

* Given his significant market experience he was fully aware of the impact this would have – and traded with the express intention of increasing the gilt’s price.

* By 09:39 others in the market had highlighted this unusual activity to the Bank, with one trader noting that this appeared to be a deliberate attempt at 'pushing the price higher in order to sell… later in the day'. 

* The price and yield of the bond significantly outperformed similar gilts on 10 October 2011 as a direct result of Stevenson’s trading. Stevenson stopped buying the bond at 14:30, whilst QE was underway.

* At 14:56, the Bank took the unprecedented step of announcing that it would not purchase the affected gilt, following significant changes in its yield that day.

* By 15:30 the gilt’s performance had completely reversed, and by the end of the day its price was back in line with comparable bonds.

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