The Last Look…
Posted by Colin Lambert. Last updated: June 30, 2026
The chat room debacle in the FX industry put paid to most instances of major banks sharing information among themselves, likewise the largely automated non-bank market makers protect their code jealously, and have been known to be litigious when an employee moves between them. But what about day traders, or “small institutions” as retail brokers like to call them? Do we have double standards?
I raise this because the FCA has ended pursuit of 11 day traders it suspected of sharing “potentially sensitive information about their trading and/or coordinating their trading strategies with each other” in commodity futures markets. The 11 essentially bought their way out of trouble by offering a GBP 1 million ex gratia payment, while not admitting any wrongdoing.
The FCA says it has “reached no view” on whether competition law was breached by the actions of the 11, and that it has ended the case because the payment was likely to be larger than any fine levied in case the traders were found guilty. The 11 were provided permission to trade by a third party and were considered “trainees”, suggesting this was one of those operations where a party provides desks and equipment and takes a share of any profits (but shuts down losses quickly), or as the FCA terms it, a ‘trading arcade”.
It should be noted that the FCA says the traders have committed to “change the way they handle sensitive information, [and] undertake annual competition law training”, but even so, one has to wonder what the response would have been if, for example, one of the banks fined for its traders’ activity in chat rooms back in the day would have offered GBP 1 billion?
The FCA says the conduct involved saw the parties engage on a bilateral or multilateral basis to share information about their future intentions and actions, as well as about their current positions and recent trades. It adds that agreements were in place that meant the traders should act individually and in competition with each other.
Does this also mean that bank management teams, if such conduct occurs again within their walls, get a good estimate of the fine they are likely to cop and go just above it to minimise reputational risk (and save a few jobs)?
A few observations, beyond the “what would the authorities have done if offered a billion?” scenario. Firstly, these shops often operate on the same premises, therefore the traders are in close contact with each other, so managing that is a nightmare. Secondly, even if they are not on premise, they are sharing the same infrastructure, including, presumably, chats. Thirdly, either the overall business is thriving, or the 11 were doing really well with their strategy if they afford to stump one million (or both).
A fourth, and perhaps more pertinently thought for the retail world, is this a warning over mirror trading? I find the practice ripe for ambiguity at best, and manipulation at worst, but many retail brokers offer their clients the chance to “mirror” the trades of a “successful” trader. Naturally, the “successful” trader can be even more successful if they sell or buy after the mirror trades have been put on, but it’s a transparent practice so buyer beware.
Whichever way you look at it, mirror trading involves sharing trading ideas and positions, more often than not outside of the original trader’s environment, so how does that stand up against what the FCA suspects is improper conduct? The answer should be, it doesn’t, but then it could just be a case of slapping a generic disclosure on the website and all is good.
The good news is that the FCA is actually consulting over whether it should accept these commitments, but you only have until 14 July to get your comments in. I don’t think it is about whether these traders should be punished, personally I don’t think they should as long as their trading was within exchange rules; after all it is no different to traders on a commodity desk in a firm discussing trading ideas and then hitting multiple sources.
What does strike me though, is this sense of double standards, and a potentially perilous precedent. If the regulator is going to accept “sorry, here’s some money, without strings attached”, then a can of worms is opened. Equally, are day traders being treated differently to, for example, bank traders? And should they be? They’re all trading on one environment under the same rules, why does one cop a guilty verdict where the other doesn’t by making a payment? Does this also mean that bank management teams, if such conduct occurs again within their walls, get a good estimate of the fine they are likely to cop and go just above it to minimise reputational risk (and save a few jobs)?
Finally, and most importantly, does this indicate a regulator without teeth or lacking the will to pursue such cases? The FCA has the right to accept the payment and drop the case, but it would probably be doing to industry a much better service if, while doing so, it makes it crystal-clear what it will, and will not stand for when it comes to such actions. All this settlement seems to do in my eyes, is muddy the waters further.
