The city watchdog has banned ex-City of London trader Adrian Geoffrey Horn after he engaged in ‘wash trading’, a form of market abuse.
Horn, who worked as a market making trader at Cheapside-based Stifel Nicolaus Europe, was fined £52,000 by the Financial Conduct Authority (FCA) and banned for carrying out any regulated work in the future.
An FCA investigation found Horn had been engaging in ‘wash trading’, a practice that involves trading where there is no change in ownership or risk, and can create a false or misleading impression to other market participants as to the price, demand or supply of a security.
The city watchdog found Horn had been executing trades with himself in the share McKay Securities.
Horn intentionally placed buy orders in McKay shares that traded with his existing sell orders, and vice-versa.
In total, the experienced trader executed 129 wash trades between June 2018 and May 2019.
FCA executive director of enforcement and market oversight Mark Steward 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.”
Horn received a discounted fine from the FCA for demonstrating a “high level of cooperation during the investigation”. As a result, his financial penalty was reduced by 25 per cent, and he received an additional further 30 per cent settlement discount.
McKay was a corporate client of Stifel. According to the FCA, 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.
Horn thought that by assisting McKay to remain in the FTSE All Share Index he would benefit the relationship between Stifel and its client.
The watchdog said that through his wash trading, 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 regulator said, the wash trades artificially inflated end of day trading volumes reported to the market.