FSA Imposes £8 Million Market Abuse Fine


On August 31, the UK Financial Services Authority (FSA) announced an £8 million (approximately $12.6 million) fine on Swift Trade Inc. (Swift Trade), a Canadian company that is not FSA authorized or regulated, for market abuse in the form of “layering.” It placed relatively large orders on one side of the London Stock Exchange (LSE) order book, which moved the share price. It then traded on the opposite side of the order book to profit from the share price movement. It then rapidly deleted the large orders that had been entered in order to cause the movement in price and repeated this conduct in reverse on the other side of the order book. None of these large orders were intended to be traded. They were carefully placed close enough to the touch price (i.e., the best bid and offer prevailing in the market at the time) to give a false and misleading impression of supply and demand, but far enough away to minimize the risk that they would be traded. The trading activity caused many individual share prices to be positioned at an artificial level, from which Swift Trade profited directly.

Swift Trade has appealed the FSA’s decision to the Upper Tribunal. Under powers granted to the FSA under the Financial Services and Markets Act 2010 taking effect from October 2010, the FSA can publish decision notices that are under appeal in appropriate cases.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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