FSA Fines Home Based Retail Trader For Market Abuse

glyder

Established member
753 93
Interesting market abuse case.
I see he is prevented from commiting market abuse by an injunction.
Does this mean he can no longer trade at all or do they just trust that he will
be legit from now on because a court says he must be?
And its weird that his surname look first when its not.

Summary
http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/053.shtml

Final Notice
http://www.fsa.gov.uk/pubs/final/alexander_barnett.pdf

Banned
http://www.fsa.gov.uk/register/indivBasicDetails.do?sid=597965

14 June 2011

The Financial Services Authority (FSA) has obtained a court order preventing Barnett Michael Alexander, a self employed trader, from committing market abuse and ordering him to pay a £700,000 fine and £322,818 in restitution to firms which experienced a loss as a result of his actions.

The FSA has also banned Alexander from performing any function in relation to a regulated activity, and he has transferred to the firms a further £306,312 held in trading accounts controlled by him.

In the period 1 January 2009 to 25 May 2010 Alexander, an experienced trader and former private client stockbroker, was operating as a self-employed trader dealing in shares and retail derivative products such as contracts for differences (CFDs) and spread bets from his home address.

Alexander manipulated the prices of shares on the London Stock Exchange by entering multiple small orders to buy and sell shares. The purpose of these orders was to manipulate the price of CFDs and spread bets, which track the price of shares. Alexander generated £629,130 by trading CFDs and spread bets at the prices he created through his share price manipulation, and frequently used CFD and spread betting accounts in the names of third parties to disguise his behaviour. This manipulation of the prices of shares and derivatives at the expense of the firms amounts to market abuse.

In May 2010 the FSA obtained a temporary injunction from the High Court preventing Alexander from committing market abuse, and froze £1 million of his assets. This was the first FSA injunction preventing market abuse. The High Court has now made that order permanent and has ordered Alexander to pay the fine and restitution. The permanent injunction is the second the FSA has obtained against an individual for market abuse.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said:

“The FSA views market manipulation extremely seriously. Alexander’s behaviour was deliberate and repeated over a significant period of time. He sought to conceal his trading and made substantial profits at the expense of the firms which allowed him to trade with them.

“The court action shows the FSA’s determination to use all our powers to prevent market abuse and to pursue those who commit it.”

The FSA has taken into account the fact that Alexander was a self employed trader, not working in the financial services industry, at the time of the misconduct and that he has fully admitted his market abuse. For these reasons the ban has been limited to a minimum term of five years.

Alexander agreed to settle at an early stage of the FSA's investigation and consented to the court order. He therefore qualifies for a 30% discount on his financial penalty (but not the requirement to make restitution). Were it not for this discount, the FSA would have asked the court to impose a financial penalty of £1,000,000 on Alexander.
 

nunrgguy

Established member
656 118
Interesting market abuse case.
I see he is prevented from commiting market abuse by an injunction.
Does this mean he can no longer trade at all or do they just trust that he will
be legit from now on because a court says he must be?
And its weird that his surname look first when its not.

Summary
http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/053.shtml

Final Notice
http://www.fsa.gov.uk/pubs/final/alexander_barnett.pdf

Banned
http://www.fsa.gov.uk/register/indivBasicDetails.do?sid=597965

14 June 2011

The Financial Services Authority (FSA) has obtained a court order preventing Barnett Michael Alexander, a self employed trader, from committing market abuse and ordering him to pay a £700,000 fine and £322,818 in restitution to firms which experienced a loss as a result of his actions.

The FSA has also banned Alexander from performing any function in relation to a regulated activity, and he has transferred to the firms a further £306,312 held in trading accounts controlled by him.

In the period 1 January 2009 to 25 May 2010 Alexander, an experienced trader and former private client stockbroker, was operating as a self-employed trader dealing in shares and retail derivative products such as contracts for differences (CFDs) and spread bets from his home address.

Alexander manipulated the prices of shares on the London Stock Exchange by entering multiple small orders to buy and sell shares. The purpose of these orders was to manipulate the price of CFDs and spread bets, which track the price of shares. Alexander generated £629,130 by trading CFDs and spread bets at the prices he created through his share price manipulation, and frequently used CFD and spread betting accounts in the names of third parties to disguise his behaviour. This manipulation of the prices of shares and derivatives at the expense of the firms amounts to market abuse.

In May 2010 the FSA obtained a temporary injunction from the High Court preventing Alexander from committing market abuse, and froze £1 million of his assets. This was the first FSA injunction preventing market abuse. The High Court has now made that order permanent and has ordered Alexander to pay the fine and restitution. The permanent injunction is the second the FSA has obtained against an individual for market abuse.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said:

“The FSA views market manipulation extremely seriously. Alexander’s behaviour was deliberate and repeated over a significant period of time. He sought to conceal his trading and made substantial profits at the expense of the firms which allowed him to trade with them.

“The court action shows the FSA’s determination to use all our powers to prevent market abuse and to pursue those who commit it.”

The FSA has taken into account the fact that Alexander was a self employed trader, not working in the financial services industry, at the time of the misconduct and that he has fully admitted his market abuse. For these reasons the ban has been limited to a minimum term of five years.

Alexander agreed to settle at an early stage of the FSA's investigation and consented to the court order. He therefore qualifies for a 30% discount on his financial penalty (but not the requirement to make restitution). Were it not for this discount, the FSA would have asked the court to impose a financial penalty of £1,000,000 on Alexander.


:LOL:So he was looking for lowish liquidity shares that he had enough size to shift then taking a side bet with a bookie:clap: (y)

How did they get wind of that? Or is he their only winning trader. "A winning trader, that can't be right. It must be stopped!"
 

new_trader

Legendary member
6,665 1,488
Interesting market abuse case.
I see he is prevented from commiting market abuse by an injunction.
Does this mean he can no longer trade at all or do they just trust that he will
be legit from now on because a court says he must be?
And its weird that his surname look first when its not.

Summary
http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/053.shtml

Final Notice
http://www.fsa.gov.uk/pubs/final/alexander_barnett.pdf

Banned
http://www.fsa.gov.uk/register/indivBasicDetails.do?sid=597965

14 June 2011

The Financial Services Authority (FSA) has obtained a court order preventing Barnett Michael Alexander, a self employed trader, from committing market abuse and ordering him to pay a £700,000 fine and £322,818 in restitution to firms which experienced a loss as a result of his actions.

The FSA has also banned Alexander from performing any function in relation to a regulated activity, and he has transferred to the firms a further £306,312 held in trading accounts controlled by him.

In the period 1 January 2009 to 25 May 2010 Alexander, an experienced trader and former private client stockbroker, was operating as a self-employed trader dealing in shares and retail derivative products such as contracts for differences (CFDs) and spread bets from his home address.

Alexander manipulated the prices of shares on the London Stock Exchange by entering multiple small orders to buy and sell shares. The purpose of these orders was to manipulate the price of CFDs and spread bets, which track the price of shares. Alexander generated £629,130 by trading CFDs and spread bets at the prices he created through his share price manipulation, and frequently used CFD and spread betting accounts in the names of third parties to disguise his behaviour. This manipulation of the prices of shares and derivatives at the expense of the firms amounts to market abuse.

In May 2010 the FSA obtained a temporary injunction from the High Court preventing Alexander from committing market abuse, and froze £1 million of his assets. This was the first FSA injunction preventing market abuse. The High Court has now made that order permanent and has ordered Alexander to pay the fine and restitution. The permanent injunction is the second the FSA has obtained against an individual for market abuse.

Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said:

“The FSA views market manipulation extremely seriously. Alexander’s behaviour was deliberate and repeated over a significant period of time. He sought to conceal his trading and made substantial profits at the expense of the firms which allowed him to trade with them.

“The court action shows the FSA’s determination to use all our powers to prevent market abuse and to pursue those who commit it.”

The FSA has taken into account the fact that Alexander was a self employed trader, not working in the financial services industry, at the time of the misconduct and that he has fully admitted his market abuse. For these reasons the ban has been limited to a minimum term of five years.

Alexander agreed to settle at an early stage of the FSA's investigation and consented to the court order. He therefore qualifies for a 30% discount on his financial penalty (but not the requirement to make restitution). Were it not for this discount, the FSA would have asked the court to impose a financial penalty of £1,000,000 on Alexander.

I wondered if this was possible and it looks like it is. This type of manipulation was written about in Reminiscences of a Stock Operator.
 

0007

Senior member
2,376 663
Shame the FSA didn't come down as hard on Fred the Shred and his mates.
 

arabianights

Legendary member
6,721 1,380
I'm confused - why were the CFD providers taking the other side of the trade if they couldnt' hedge in the underlying?
 

glyder

Established member
753 93
Shame the FSA didn't come down as hard on Fred the Shred and his mates.

Too right - Good point,
This bloke's behaviour might cause some loss of confidence in trnsparent markets, hurt a few spreadbet companies and he is fined £700K.
Fred the Shred and his ilk (all of course FSA regulated individuals) nearly destroy the UK banking systems and economy and
leave taxpayers billions in debt and walks off with £££m in their pockets.
Something very wrong there.
 

arabianights

Legendary member
6,721 1,380
I've read the notice and as far as I'm concerned what he did should have been legal

It is entirely the problem of the spread betting firms for having a stupid price setting algorithm. They shouldn't have been willing to deal in any size.
 

glyder

Established member
753 93
I've read the notice and as far as I'm concerned what he did should have been legal

It is entirely the problem of the spread betting firms for having a stupid price setting algorithm. They shouldn't have been willing to deal in any size.

He tried that reasoning
(from the final notice)
6.9." Mr Alexander has also stated that his trading strategy was only possible because of
the way in which the retail derivative brokers chose to price their products. The FSA
does not consider that this mitigates the seriousness of Mr Alexander’s conduct"
 

arabianights

Legendary member
6,721 1,380
Maybe he was putting the bet on first? Dunno.

If you read the report it gives an example:

report said:
The following is an example of Mr Alexander both seeking to influence and
influencing the opening and closing legs of a CfD transaction:
(1) On 3 December 2009 at 14:16, the LSE order book for shares of Domino
Printing Sciences plc (“Domino”) showed a best bid of 290p in 591 shares
(i.e., an unfulfilled order to buy 591 shares at 290p per share) and a best offer
of 298.7p in 1818 shares (i.e., an unfulfilled order to sell 1818 shares at 298.7p
per share). The bid-offer spread was therefore “290p by 298.7p”.
(2) At 14:16:28, Mr Alexander entered an order to sell 15 shares in Domino at
291p. The effect of this order was to enter into the LSE order book a new best
offer at 291p, thus tightening the LSE bid offer spread to “290p by 291p”.
(3) When this order was placed, an unrelated party bought the shares (at
14:16:28.633885), so the bid-offer spread immediately returned to its previous
position of 290p by 298.7p. Mr Alexander had therefore sold 15 Domino
shares at a price of 291p.
(4) Nine minutes later, at 14:25, the LSE order book was showing a best bid of
290p (in 591 shares) and a best offer of 298.7p (in 1718 shares).
(5) At 14:25:51, Mr Alexander entered an order to sell 13 shares, this time at a
slightly higher price of 292p. The effect of this order was to cause the entry
into the LSE order book of a new best offer at 292p, thus tightening the LSE
bid offer spread to “290p by 292p”.
(6) The automated electronic trading system of a retail derivative provider (“Firm
A”) matched the LSE’s best bid-offer spread of 290p by 292p in respect of
CfDs, allowing its clients to buy CfDs at 292p (prior to the order placed by Mr
Alexander, CfDs would have been available to buy at the higher price of
298.7p).
(7) At 14:26:00 (i.e. 9 seconds after Mr Alexander caused the share order to be
entered), an account at Firm A in the name of a relative of Mr Alexander
bought CfDs with exposure to the equivalent of 6,700 Domino shares at a price
of 292p. This transaction thereby opened a CfD position in Domino on this
account.
(8) The order for 13 shares traded on the LSE at 14:35:34 when an unrelated third
party bought the shares offered. Mr Alexander had therefore sold a further 13
Domino shares at a price of 292p.
- 8 -
(9) At 15:10, the LSE order book for shares of Domino showed a best bid of 290p
(in 10414 shares) and a best offer of 298.6p (in 162 shares).
(10) At 15:10:50, Mr Alexander caused an order for 21 Domino shares to be placed
on the LSE order book at 297.2p. This tightened the LSE bid offer spread to
“297.2p by 298.6p”.
(11) Again, the automated electronic trading system of Firm A matched the LSE
best bid-offer spread of 297.2p by 298.6p, thereby allowing its clients to sell
CfDs at 297.2p (prior to the order placed by Mr Alexander, CfDs would have
been available to sell at a lower price of 290p).
(12) At 15:11:07 (i.e., 17 seconds after Mr Alexander caused the share order to be
entered), the account at Firm A sold CfDs with exposure to 6,700 Domino
shares at a price of 297.2p. This transaction thereby closed the CfD position in
Domino on the account at Firm A.
(13) The order for 21 shares on the LSE traded at 15:14:10 when an unrelated third
party sold the shares to the DMA CfD provider.
(14) The effect of the above trading between 14:16 and 15:14 on 3 December 2009
in terms of profit and loss is as follows:
(15) The account at Firm A made a profit of 5.2p per share on the equivalent of
6700 shares, a total gross profit of £348.40 (before fees and charges).
(16) Mr Alexander sold 15 shares at 291 and 13 shares at 292p, then bought 21
shares at 297.2p. The net cost of these transactions was £19.20p (i.e., the
difference between the cost of buying and selling the shares), plus the account
was left with a short position of 7 Domino shares. There would also have been
administration charges payable in respect of these trades.
(17) The profit made through the CfD transactions at Firm A was many times
greater than the small costs associated with trading the shares.

Nothing terribly sophisitcated about it.

@glyder yes that's what the FSA say. But in my view (moral not legal) they're wrong. If you make a price it's your responsibility to get it right. End of.
 

jfutures

Junior member
32 0
Disgraceful. He beat them and they can't take it. What a joke, there is no way he should be fined a penny!
 
 
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