A day trader fined £700,000 by the Financial Services Authority (FSA) for market manipulation yesterday hit back by accusing the City watchdog of heavyhandedness and protecting spread-betting firms from their own carelessness.
The FSA reduced its fine on Barnett Alexander from £1m because he settled and reclaimed £629,130 on behalf of firms he traded with.
He was punished for manipulating the price of shares on the London Stock Exchange by entering small orders to buy and sell shares and affect the price of spread bets.
However, Mr Alexander claimed yesterday his actions did not affect the value of shares . Instead, he said he took advantage of spread-betting firms, which are "virtual" exchanges.
His small early-morning orders to buy and sell shares would dictate the price offered by the spread-betting firms and he would then make a big order of, say, 30,000 virtual shares at the spread-betting firm – usually City Index – and close out his position at a profit.
He said: "My argument is those 30,000 shares don't manipulate the market. They have consequences but those consequences are aimed at City Index, not at hurting the integrity of the market.
"The FSA is there to protect the market, not to protect City Index."
The FSA pointed to the size of the fine, Mr Alexander's decision to settle and the fact that he used "third-party" names to hide his activities as evidence of the seriousness of his actions.
Mr Alexander, a former stockbroker, said he used his wife's name for some trading because spread-betting firms often closed down accounts for profitable traders.
He said it was impossible for day traders, working from home without compliance departments to know what was not allowed under the rules on market abuse, where the FSA is cracking down.
Tracey McDermott, the FSA's acting director of enforcement and financial crime, said: "Alexander's behaviour was deliberate and repeated over a significant period of time. He sought to conceal his trading and made substantial profits at the expense of the firms which allowed him to trade."
City Index said: "Since February 2010, City Index has been aiding the FSA in its investigation of suspicious trading activities carried out by Alexander.
"This involved him abusing the City Index trading system, which gives our clients the benefit of extra liquidity when trading certain equity markets," it added.