Warning Notice Statement 17/1

The Financial Conduct Authority (the FCA) gave an individual a warning notice on 12
December 2016 proposing to take action in respect of the conduct summarised in this
statement.

IMPORTANT: a warning notice is not the final decision of the FCA. The
individual has the right to make representations to the Regulatory Decisions
Committee (RDC) which, in the light of those representations, will decide on
the appropriate action and whether to issue a decision notice. The RDC is a
Committee of the FCA Board which decides whether the FCA should give certain
statutory notices described as within its scope by the FCA’s Handbook.

If a decision notice is issued, the individual has the right to refer the matter to
the Upper Tribunal which would reach an independent decision on the
appropriate action for the FCA to take, if any.

If either the RDC or the Upper Tribunal decides that no further action should be
taken, the FCA will publish a notice of discontinuance provided it has the
individual’s consent.

The following is a summary of the reasons why the FCA gave the individual a warning
notice:

•
The FCA considers that on 12 instances in July and early August 2014 the individual,
who was a bond trader employed by a bank, deliberately engaged in market abuse
contrary to section 118(5) of the Financial Services and Markets Act 2000.

•
Specifically, the individual, in the course of his employment, carried out a strategy of
entering “best bid” or “best offer” quotes for government bonds on an inter-dealer
trading platform that was designed to induce, and had the effect of inducing, other
market participants who were tracking quotes to raise or lower their quotes so that
he could benefit from those price movements. By his best bids he represented to the
market an intention to buy (when his true intention was to sell) and by his best offers
he represented an intention to sell (when his true intention was to buy).

•
When his intention was to buy, his misleading best offers induced other market
participants to lower their offers, and when his intention was to sell his misleading
best bids induced other market participants to raise their bids. The individual then
purchased from those market participants who had lowered their offers, or sold to
those who had raised their bids, thereby trading at a more advantageous price than
he would have achieved at that time, but for his having misled those market
participants.

•
The individual’s behaviour constituted market abuse within the meaning of section
118(5) of the Act in that it gave a false and misleading impression as to the price and
supply or demand of the bonds and it also secured the price at an artificial level.