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UK watchdog fines and bans bond trader in first gilt rigging case

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(Globalpost/GlobalPost)

By Huw Jones

LONDON (Reuters) - Britain's financial watchdog said on Thursday it had fined former Credit Suisse bond trader Mark Stevenson 662,700 pounds ($1.1 million), in its first enforcement action for manipulating the 7.2 trillion pound UK government bond market.

The Financial Conduct Authority (FCA) said it had also banned Stevenson, who has nearly 30 years' experience, from the industry for ramping up the price of a bond in the hope of creaming off a bigger profit if the Bank of England bought it.

The FCA said Stevenson intended to sell his holding, worth 1.2 billion pounds, to the Bank of England for an artificially high price during quantitative easing (QE) operations on October 10 2011.

QE refers to the central bank buying UK government bonds, known as gilts, to increase liquidity in markets and aid economic recovery.

"His unusual trading was reported within 40 minutes and the Bank decided not to buy that gilt as part of QE," the FCA said in a statement.

"Stevenson's 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 UK taxpayers," FCA director of enforcement Tracey McDermott said.

Stevenson told the FCA he had traded the bond on October 10 in an open and transparent manner and continued to purchase it until it reached what he believed was its fair value.

As a bond trader with significant market experience, Stevenson was able to trade with a large degree of autonomy, designing and implementing his own trading strategies, the watchdog said.

His conduct was particularly egregious but there is no evidence of collusion with traders in other banks, the FCA said.

Neither Credit Suisse Securities Europe nor any other individuals employed by the bank were subject to criticism, the watchdog added.

The gilt Stevenson manipulated was UKT (United Kingdom Treasury) 8.75 percent 2017, which in other words paid 8.75 percent interest and matures in 2017.

Stevenson agreed to settle the FCA's probe early to qualify for a 30 percent discount and avoid a fine of nearly 1 million pounds. ($1 = 0.6014 British Pounds)

(Reporting by Huw Jones; Editing by Clare Hutchison and David Holmes)

http://www.globalpost.com/dispatch/news/thomson-reuters/140320/uk-watchdog-fines-bans-bond-trader-first-gilt-rigging-case