Regulation  

FCA fines bond trader over market abuse

FCA fines bond trader over market abuse

The Financial Conduct Authority has fined a former bond trader £60,000 for engaging in market abuse.

After an investigation the FCA found Paul Walter created a false and misleading impression about supply and demand in the market for Dutch State Loans (DSL).

The FCA found the former Bank of America Merrill Lynch International bond trader did this on 12 occasions between July and August 2014 and his abusive trading resulted in a profit of €22,000 (£19,500) to his trading book.

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Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Market manipulation undermines market integrity and confidence.

"The FCA will be vigilant in detecting abusive practices and will take robust action to protect issuers and participants from all over the world from the harm caused by such abuse."

The FCA found that on 11 occasions Mr Walter entered a series of quotes that became the best bids on BrokerTec, an electronic trading platform, giving the impression that he was a buyer in a DSL.

Other market participants who were tracking his quotes with algorithms followed him in response and raised their bids.

Mr Walter then sold to those other participants and cancelled his own quote.

Despite placing quotes that suggested he wanted to buy, he actually sold the DSL.

On one further occasion, Mr Walter did the opposite by attracting market participants to follow him with the result he purchased the DSL from the market participants who had recently lowered their offer price and then cancelled his own quote. 

While the FCA did not find Mr Walter knew his conduct amounted to market abuse, it considered he was negligent in not realising this.

Market participants were affected by Mr Walter’s trading because his strategy manipulated their prices and led to them either buying or selling DSLs at worse prices than they could otherwise have done.

damian.fantato@ft.com