UK upholds record market rigging fine for Swift Trade

Mon Jan 28, 2013 7:07am EST
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By Huw Jones

LONDON (Reuters) - A British court has upheld the Financial Services Authority's 8 million pound ($13 million) fine for Canadian trading firm Swift Trade, the British watchdog's largest penalty for market manipulation.

The FSA said Swift Trade engaged in "systematic and deliberate" trading practices known as "layering" - posting tens of thousands of orders on the London Stock Exchange LSE.L from different parts of the world to dupe the UK market about true supply and demand for the shares. The resulting share price moves were exploited and the original orders deleted.

Following a transatlantic probe involving Canada and the United States, the FSA fined the now-dissolved firm in August 2011 but an appeal with the Upper Tribunal was lodged.

"The Tribunal described this as being 'as serious a case of market abuse of its kind as might be imagined'," the FSA said on Monday. FSA director of enforcement, Tracey McDermott added: "We urge other market participants to take note of this judgment which makes it clear that layering is abusive."

Canadian law allows the FSA to pursue collecting the fine as if the company had not been wound up. Swift Trade was voluntarily dissolved under Canadian law in December 2010 and its assets transferred to BRMS Holdings.

Although the UK watchdog has known it may not get all or even part of the fine from Swift Trade, it will continue to pursue the affiliate for money. The regulator was also keen for a court to formally acknowledge that layering is illegal.

The case is part of the FSA's "credible deterrence" policy of cracking down harder on market manipulation with a willingness to take on costlier and complex cross-border probes.

The FSA expects brokers and those who give traders direct access to exchanges, to have appropriate controls to spot and report abuses, McDermott said.   Continued...

A man is seen behind the entrance door of the offices of the Financial Services Authority (FSA) in Canary Wharf, London, November 19, 2010. REUTERS/Simon Newman