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FSA fines firm £8m for market abuse

The FSA has fined trading platform Swift Trade £8m for market abuse.

The regulator says the firm, which is a non FSA authorised Canadian company with global operations, has been fined for “layering” which it says is a form of systematically and deliberately engaging in a form of manipulative trading.

The FSA says that between January 1, 2007 and January 4, 2008, Swift’s trading caused a succession of small price movements in a wide range of individual shares on the London Stock Exchange from which the firm has made substantial profits. The regulator says that these profits are in excess of £1.75m.

Swift Trade has referred the matter to the Upper Tribunal where it and the FSA will present their case. The Tribunal will then determine the appropriate action for the FSA to take. The Tribunal may uphold, vary or cancel the FSA’s decision.

Swift Trade and its president and CEO, Peter Beck, have commenced judicial review proceedings to challenge the FSA’s decision made on 11 May 2011 to publish the decision notice. These proceedings are ongoing.  

Swift Trade also obtained a High Court injunction on  June 9, 2011 to restrain publication of the decision notice.  That injunction concluded on August 16, 2011 following the Tribunal’s decision dated August 2, 2011 that rejected an application for prohibition of publication of the decision notice.  On August 26, 2011, the High Court dismissed a further application for an interim injunction to restrain the FSA from publishing the decision notice.

On December 13, 2010, Swift Trade was voluntarily dissolved under Canadian law after changing its name to 7722656 Canada Inc and its remaining assets were transferred to a former holding company, BRMS Holdings Inc. Any creditor’s claims including fines levied by the FSA would be paid out of these funds.

The FSA says this was a particularly serious case of market abuse, highlighting the fact that it was widespread and repeated on a number of occasions involving tens of thousands of trading orders by many individual traders. The regulator says that such action can undermine market confidence.

The FSA also says that from March 2007, Swift Trade became aware that the LSE had raised concerns about its trading activity it actively sought to evade restrictions on its trading by refining its trading pattern to avoid detection. Swift Trade said it would impose effective controls on its trading but in fact took further steps to avoid regulatory scrutiny by changing its Direct Market Access provider. DMA is a service offered by some stockbrokers who are exchange member firms that enables investors to place buy and sell orders directly on the order book.

FSA acting director of enforcement and financial crime Tracey McDermott says: “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.

“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.”

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