The defendants typically used a mixture of large and small orders entered on one side of the LSE’s order book to create a false impression of supply or demand in a particular stock. These orders were not intended to be traded. The large orders were carefully placed at prices close enough to the best bid or offer prevailing on the LSE at the time to give a false impression of supply and demand, but far enough away to minimise the risk that they would be traded. The small share orders (typically around 100 shares) were used to improve the best bid or offer price. As the price improved, further large orders were strategically placed at prices close to the new best bid or offer in order to support the improved price. In this way the defendants systematically sought to manipulate the share price up and down.
These orders had the effect of moving the share price as the market adjusted to the apparent shift in the balance of supply and demand. Once the price had been moved to an advantageous level, the defendants initiated a trade on the other side of the order book in order to profit from the price movement that they had created. These trades took place either on the LSE or on a competing MTF in order to take advantage of available liquidity.
The large “layered” orders, which were never intended to trade and which were used to stimulate the price movement of the relevant shares, were then cancelled and the process would start over again, typically aimed at moving the share price in the opposite direction. In this way the defendants’ actions consistently resulted in them buying shares at lower prices and selling shares at higher prices than would have been the case had the strategy not been employed[3].
The defendants accessed the relevant trading platforms via a service offered by certain brokers known as Direct Market Access (DMA). DMA allows clients direct access to exchanges and other trading platforms. The defendants did not trade directly in shares but used a derivative instrument called a Contract for Difference (CFD), the price of which precisely matches the price of the underlying share. The nature of the CFD/DMA accounts was such that the defendants knew that CFD orders placed with the DMA providers would immediately and automatically result in the placement of equivalent orders in the underlying shares on the relevant trading platform, so as to affect the underlying share price.