British regulator the Financial Conduct Authority (FCA) has imposed a £60,090 fine on former Bank of America Merrill Lynch International Limited (BAML) bond trader Paul Walter for engaging in market abuse.
The FCA found that Walter engaged in market abuse by creating a false and misleading impression as to supply and demand in the market for Dutch State Loans (DSL) on 12 occasions in July and August 2014.
Mark Steward, executive director of enforcement and market oversight, 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.”
Best bids raised 11 times
On 11 occasions, 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.
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, 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 Walter knew his conduct amounted to market abuse, the FCA considered he was negligent in not realising this.