Your IndustrySep 16 2020

Hedge fund CIO fined £100k for market abuse

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Hedge fund CIO fined £100k for market abuse
Credit: Chris Ratcliffe/Bloomberg

The chief investment officer of defunct hedge fund Fenician Capital Management has been fined £100,000 for market manipulation.

In a decision notice published today (September 16), the Financial Conduct Authority said it had imposed a financial penalty and ban on Corrado Abbattista — an experienced trader and portfolio manager as well as former CIO at Fenician.

But Mr Abbattista has referred the decision notice to the upper tribunal, where both he and the FCA will present their cases.

The tribunal will then determine what, if any, is the appropriate action for the FCA to take. Therefore, the proposed action outlined by the City watchdog will have no effect pending the result of the case by the tribunal.

What allegedly happened

The FCA alleges that between January and May 2017, Mr Abbattista repeatedly placed in the market “large, misleading orders” for Contract for Differences, referenced to equities, which he did not intend to execute.

A CFD is an agreement between a customer and a financial institution, where the difference in value of a specified asset at the beginning and end of the contract is exchanged. In the case of equities, these products allow customers to speculate on share price movement without the need to buy the underlying shares.

At the same time, he placed smaller orders that he did intend to execute on the opposite side of the order book to the misleading orders, according to the FCA.

The regulator alleged that through his ”large and misleading orders” Mr Abbattista falsely represented to the market an intention to buy/sell when his true intention was the opposite.

At the same time, the misleading orders were for volumes of shares far greater than the typical market size, which would have created a false and misleading impression regarding the true supply of and demand for the shares in question to other market participants, it said.

The FCA said: “Mr Abbattista was aware of the risk that his actions might constitute market manipulation, but recklessly went ahead with those actions anyway.”

Mr Abbattista’s trading was initially identified by the FCA’s internal surveillance systems. 

The FCA ingests order book data from the leading UK equity trading venues and then runs surveillance algorithms, designed to identify potentially abusive behaviours, across that consolidated data set.  

The FCA added that the fine and the prohibition should “reflect the serious nature of the breach” and act as a deterrent to other market participants.

According to Companies House, Fenician Capital Management was dissolved in March 2019. The FCA’s register shows it has not been authorised since August 2018.

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