Ex-Bank of America Trader Fined $79,500 for Market AbuseBy
Bond trader Paul Walter fined over Dutch loan-market trading
Abusive trading made Walter 22,000 euros in profit for book
A former Bank of America Corp. bond trader was fined 60,000 pounds ($79,500) by the U.K. Financial Conduct Authority for market abuse in the trading of Dutch State Loans.
Paul Walter made 22,000 euros ($25,900) for his trading book by creating a false and misleading impression of supply and demand on 12 occasions in July and August 2014, the FCA said Wednesday. While the regulator found the 47-year-old didn’t realize his behavior was illegal, it said he was negligent in not knowing.
The FCA has been poised to take more action against market abuse after the introduction of rules covering a greater range of platforms and conduct last year. In April, the regulator fined and banned two individuals in relation to a spread-betting business. The FCA has also been pushing firms to take greater responsibility for employees under the Senior Managers and Certification Regime, which puts the onus on firms to prove staff are fit for their roles.
"This case is another example of the FCA’s drive toward personal accountability," said Claire Cross, a former FCA lawyer who now works at Corker Binning. "It is easy for the regulator to take this stance where there has been clear, flagrant abusive behavior, but it will be of interest to see where the FCA draws the line when the behavior is more nuanced."
Walter, who started trading government bonds 20 years ago, was a director and senior trader in London on Bank of America’s EMEA Linear Rates European Government Bond Trading Desk. According to the FCA, Walter entered a series of misleading quotes on the electronic trading platform BrokerTec in 2014 that induced other market participants to raise their bids, before canceling his orders and taking the opposite position, securing a better price.
Lawyers for Walter didn’t immediately return calls and emails seeking comment.
Walter deliberately manipulated orders being controlled by algorithms to follow his quotes, the FCA said, allowing him to buy or sell the Dutch State Loans at higher or lower prices. He was suspended from the U.S. lender in August 2014.
“Market manipulation undermines market integrity and confidence,” said Mark Steward, FCA executive director of enforcement and market oversight. “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.”