FCA fines and prohibits trader for market abuse

The FCA has fined Mr Adrian Geoffrey Horn, formerly a market making trader at Stifel Nicolaus Europe Limited (“Stifel”), £52,500 for market abuse and prohibited him from performing any functions in relation to regulated activity.

Following an investigation, the FCA found that Mr Horn, an experienced trader, engaged in market abuse by executing trades with himself in the share McKay Securities Plc (“McKay”).

This practice known as “wash trading” involved Mr Horn intentionally placing buy orders in McKay shares that traded with his existing sell orders (and vice-versa). In total, Mr Horn executed 129 wash trades during the period 18 July 2018 to 22 May 2019. Mr Horn entered orders into the market in such a way as to try and avoid anyone detecting that he was wash trading.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

“Mr Horn’s manipulative trading was serious. Wash trading is a form of manipulation which undermines market efficiency and integrity.

“The FCA has also developed ways to detect this type of manipulation as well as other forms of market abuse and, as this case demonstrates, we will take robust action against such abuse.”

McKay was a corporate client of Stifel. Mr Horn’s motive for executing the wash trades was to ensure that a minimum number of shares were traded in McKay each day, which he believed was a requirement to ensure that McKay remained in the FTSE All Share Index. Mr Horn thought that by assisting McKay to remain in the FTSE All Share Index he would benefit the relationship between Stifel and its client.

Through his wash trading Mr Horn gave false and misleading signals to the market as to demand for and supply of McKay shares. His actions resulted in other market participants seeing what they believed to be legitimate trades in McKay occurring. In addition, the wash trades artificially inflated end of day trading volumes reported to the market. Mr Horn was aware of the risk that his actions might constitute market manipulation but recklessly went ahead with those actions anyway.

Mr Horn demonstrated a high level of cooperation during the investigation. In particular, he made significant admissions during an early interview with the FCA. As a result, Mr Horn’s financial penalty was reduced by 25%. In addition, Mr Horn received a further 30% settlement discount.

The FCA considers that the fine and the prohibition imposed reflect the serious nature of the breach set out in the Final Notice and should act as a deterrent to other market participants.