The Financial Conduct Authority, the British regulator, has fined Corrado Abbattista, formerly a portfolio manager, partner and Chief Investment Officer at Fenician Capital Management LLP, £100,000 for market abuse and prohibited him from performing any functions in relation to regulated activity.
Following an investigation, the FCA found that Abbattista, an experienced trader, engaged in market abuse by creating a false and misleading impression as to the supply and demand for equities between 20 January and 15 May 2017.
Mark Steward, executive director of enforcement and market oversight, said: ‘Market manipulation is corrosive of market integrity, undermining clean, efficient and fair markets. The FCA has increased its capability to detect and take robust action against the harm to shareholder value caused by such abuse.'
Although the primary responsibility to prevent and detect manipulative strategies sits with the buy-side firm itself, the DMA provider would also have had sufficient information to identify the manipulative trading by its client.”
On multiple occasions, Abbattista placed large misleading orders for Contracts for Difference (CFDs), referenced to equities, which he did not intend to execute. 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. Through his large misleading orders, Mr Abbattista falsely represented to the market an intention to buy/sell when his true intention was the opposite.
Abbattista was aware of the risk that his actions might constitute market manipulation, but recklessly went ahead with those actions anyway.
The trading undertaken by Abbattista was 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.
Abbattista referred this matter to the Upper Tribunal, but his reference was withdrawn on 10 November 2020.
Commenting on the case, Nick Bayley, managing director and head of UK regulatory consulting of Duff & Phelps, said: "This is FCA's very first market abuse outcome under the EU Market Abuse Regulation, which went live in July 2016. We can see from its Annual Report that the regulator had 29 market manipulation cases open as at 31 March this year, so hopefully other outcomes will follow quickly in its wake."
"In terms of new lessons from this case, there are relatively few. Layering and spoofing like this has been around a long time and is probably the most regularly sanctioned form of market manipulation around the globe, with the CFTC in particular producing numerous outcome very similar to this."
Bayley added: "It's interesting to speculate whether the role of the unnamed DMA provider has also been scrutinised by the FCA. Although the primary responsibility to prevent and detect manipulative strategies sits with the buy-side firm itself, the DMA provider would also have had sufficient information to identify the manipulative trading by its client."