Stifel Former Trader Gets Fined by FCA over Wash Trades

Britain’s markets watchdog has fined Adrian Geoffrey Horn, formerly a market making trader at Stifel Nicolaus Europe Limited, for market manipulation involving the risky practice of wash trades.

An FCA order requires Horn to pay a civil penalty of £52,500 for carrying out banned self-dealing involving McKay Securities Plc stock traded in the FTSE All Share Index. He has further been permanently barred from accessing any regulated Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term for improperly acting as buyer and seller in the same transactions, a practice known as wash trading.

The abusive pattern occurred as McKay was a corporate client of Stifel. Horn’s motive for executing the wash trades was to give the appearance of activity in the market to ensure that McKay will remain in the stock index. In addition, the wash trades artificially inflated McKay’s trading volumes reported to the market.

He thought that by assisting McKay to remain in the FTSE All Share Index he would benefit the relationship between Stifel and its client.

According to the regulator’s investigation, it found that Adrian entered equal and opposite transactions in a total of 129 wash trades, matching details including the stock, quantity, price and timing of those trades and orders. The fraudulent scheme occurred during the period between 18 July 2018 and 22 May 2019.

“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," said Mark Steward, FCA’s Executive Director of Enforcement and Market Oversight.

Additionally, a cross trade occurs when a broker acts as a market maker by matching buy and sell orders for the same security across different client accounts, without sending the orders to the Stock Exchange Stock Exchange A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments. By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividendsStock exchanges have developed into a permanent fixture in the fin A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments. By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividendsStock exchanges have developed into a permanent fixture in the fin Read this Term to be executed.

However, the FCA credited Horn for his 'high level of cooperation' with its investigation, including 'significant admissions' during his early interview with the regulator. As a result, his financial penalty was reduced by 25$ and also benefited from a further 30% settlement discount.