The FCA is seeking to impose prohibition orders and fines on three traders for market abuse during their time working at Mizuho International Plc (Mizuho). The Decision Notices would impose the widest possible prohibition on the traders, that they will not be allowed to perform any function in relation to any regulated activity. Each would also face a fine, £395,000 for the more senior trader (who had worked in financial services for 18 years) and £100,000 each for the two others (who had 10 and four and a half years’ trading experience respectively). There is no enforcement action against Mizuho itself.
The FCA’s investigation was into conduct that took place in June and July 2016. The regulator believes that the traders engaged in dishonest conduct by repeatedly and deliberately placing large, misleading orders for certain Italian Government Bond futures, called BTP Futures. The FCA has found that the purpose of these orders was to create an impression on one side of the order book that there was increased supply or demand. This is said to have assisted in the execution of smaller, genuine orders on the other side of the order book by encouraging the market to believe there was additional supply or demand, allowing easier fulfilment of the genuine orders. This behaviour is consistent with a relatively well-known pattern of market abuse conducted by placing orders in order to create false impressions in the market, with no intention actually of executing them.
While the FCA’s Decision Notices against these traders have been published, the traders have exercised their right to refer their cases to the Upper Tribunal, and therefore the FCA’s intended penalties will not have force unless and until the Upper Tribunal upholds its decisions.