Ex-Credit Suisse Trader Fined for Manipulating Gilt Price

Mark Stevenson intended to sell his 1.2 billion-pound gilt holding to the Bank of England at an artificially high price during a quantitative-easing operation.

(Bloomberg) — Mark Stevenson, a former bond trader at Credit Suisse Group AG, was fined 662,700 pounds ($1.1 million) and banned from working in the finance industry for deliberately manipulating a U.K. government bond price.

Stevenson, who had nearly 30 years of experience, intended to sell his 1.2 billion-pound gilt holding to the Bank of England at an artificially high price during a quantitative- easing operation, the U.K. Financial Conduct Authority, the markets regulator, said in a statement today.

Stevensons abuse took advantage of a policy designed to boost the economy with no regard for the potential consequences for other market participants, and ultimately, for U.K. taxpayers, Tracey McDermott, the FCAs head of enforcement, said in the statement.

While the London-based regulator says the case is an isolated incident, its another instance of manipulation of financial markets in a city roiled by interest-rate and foreign- exchange rate rigging. The FCA is also reviewing whether markets for precious metals were manipulated.

The BOE passed information to the regulator regarding price moves in the gilt market, the central banks markets director, Paul Fisher, told lawmakers in July. It related to bond buying carried out in a reverse auction on Oct. 10, 2011. The BOE rejected all bids that day for notes due August 2017, citing significant changes in its yields in the run up to the auction.

Quantitative Easing

Stevenson bought 331 million pounds of the gilts that day, the first day of the second round of quantitative easing, a program designed to spur growth by capping bond yields and improving liquidity. The purchase equaled about 2,700 percent of the average daily volume traded for the bond in the previous four months, according to the FCA.

The price and yield significantly outperformed all gilts of similar maturity that day because of his trading, the regulator said. He offered to sell 850 million pounds worth of the bond to the central bank that afternoon, including the amount hed acquired earlier in the day, at a price that was inflated because of Stevensons trading.

His trading was designed to move the price of the bond, in an attempt to sell it to the Bank of England at an abnormal and artificial level, thereby increasing the potential profit made from the sale, the FCA said.

Stevenson agreed to settle the case at an early stage of the investigation and received a 30 percent discount on the fine, the FCA said. His lawyer, Angela Hayes, didnt immediately respond to a call seeking comment.

Credit Suisse said it cooperated with the probe.

We agree with the FCAs decision to sanction Mr. Stevenson and are pleased to note that neither Credit Suisse nor any other employed individuals have been found at fault, Adam Bradbery, a spokesman for the Zurich-based bank, said in a statement.