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FYI.

jdaw1, in an email to the [url=http://www.fca.org.uk/]Financial Conduct Authority[/url] on 14th May 2014, wrote:Dear sir or madam,

Is the following market manipulation? Please could I be sent pertinent guidance.

I did not bid at a recent auction of old wine, so as not to bid against a friend who wanted the same lots. Indeed, his hospitality is such that I might well drink the same bottles at his table. But my abstaining from bidding might have lessened the sale price of the bottles (indeed, that was the intention), to the detriment of the vendor, to the slight detriment of the auctioneer, and arguably to the detriment of the wider market in old wine.

Has any offence been committed by my not bidding? What are the boundaries?

I am not a dealer, merely a collector (a bit) and consumer (more). Does not being a dealer actually matter? If it does, assume that all collectors exchange bottles amongst themselves, for money or for other bottles. Where is the consumer-dealer boundary?

What other parameters matter?

Thank you.

The example was hypothetical, but entirely realistic.

The [url=http://www.fca.org.uk/]Financial Conduct Authority[/url], in an email on 2nd June 2014, wrote: Thank you for your email dated 14 May 2014 regarding actions at an old wine auction.

The situation you have described does not fall within our remit. We do not regulate the selling of wine and therefore cannot comment whether market manipulation has taken place.

You may wish to speak with a legal body for guidance.

Before replying, please think. Anything you say will be noted, and might be used against you. Please think.

Here's a first: In a desperate bid to start an argument Julian shops himself.

They must've heard of you, they do not seem keen to engage.

I wanted an explanation of the rules, so requested one. Government bodies use hypothetical as an excuse not to answer, so a hypothetical was put forward as if true.

There is regulatory creep. What is legal today, and known to the authorities to be happening, can tomorrow become very despicable. E.g., the Bank of England knew of Lɪʙᴏʀ shenanigans last century, but took offence only recently. (Casablanca: “Your winnings, sir”.)

I still want an explanation of the rules. Am I allowed not to bid because a friend wants the same bottles and is bidding?

Indeed, this is being posted publicly to show a bona fide effort to find the rules, and the evasion of the authorities.

I think you should just live with the uncertainty. Some things are best left undecided.
If there is no plaintiff, then there is no judge.

AW77 wrote:I think you should just live with the uncertainty. Some things are best left undecided.
If there is no plaintiff, then there is no judge.

Wise words

flash_uk wrote:

AW77 wrote:I think you should just live with the uncertainty. Some things are best left undecided.
If there is no plaintiff, then there is no judge.

Wise words

I disagree, Julian has, while not quite sat down on the seat in the bus reserved for white folk, done a noble thing. Potentially taking a bullet so the rest of us may live in peace and freedom, well sort of.

Interesting.

For crying out loud. This is nonsense!

LGTrotter wrote:

flash_uk wrote:

AW77 wrote:I think you should just live with the uncertainty. Some things are best left undecided.
If there is no plaintiff, then there is no judge.

Wise words

I disagree, Julian has, while not quite sat down on the seat in the bus reserved for white folk, done a noble thing. Potentially taking a bullet so the rest of us may live in peace and freedom, well sort of.

Asking for clarification does not mean that any clarification which is forthcoming will benefit anyone.

LGTrotter wrote:Potentially taking a bullet so the rest of us may live in peace and freedom, well sort of.

As, hopefully pro tem, my finances constrain my bidding, I was the right man to volunteer for the bullet. Hence the correspondence.

It has been only slightly effective. If the FCA were now to take an interest, a partial defence has been granted.

DRT wrote:Interesting.

Indeed, “Interesting”. But my likely behaviour is less formal than this. My motive is much nearer “X is buying, so I won’t. Hopefully one will appear at a tasting.” Is that, for the relevant purposes, a conspiracy or even an agreement? Not really. But if splitting a lot with somebody, as I am on record as having done, what do I need to do to avoid an offence? A lot, it seems. Interesting.

jdaw1 wrote:

LGTrotter wrote:Potentially taking a bullet so the rest of us may live in peace and freedom, well sort of.

As, hopefully pro tem, my finances constrain my bidding, I was the right man to volunteer for the bullet. Hence the correspondence.

In which case I withdraw my support, and side with those who would call you a poltroon and a niggardly scapegrace.

Is there any evidence of people actually getting convicted or even prosecuted for this?

I do know that auction houses get very shirty with dealers who try to put a fix in, but the response is that they are barred rather than nicked.

Another interesting reference, which along with (the underlying assumptions within) Pallant vs Morgan might also be relevant. The situation might also be different for dealers than for private individuals.

jdaw1 wrote:Where is the consumer-dealer boundary?

Although nothing in their reply addressed this, I would hope that a judge would interpret the law sensibly; that a dealer is someone who runs a business to buy and sell such items at profit - which is very different from friends exchanging a bottle, or letting someone have a bottle for a fair consideration.

In the scenario that JDAW presented, the successful purchaser does not offer a specific inducement to him not to bid on a certain lot. Informing someone of your interest in an auction lot is not in itself an offence. JDAW's hopes of future hospitality as a determinant factor in his bidding behaviour does not appear to breach the law, provided there is no paper trail to that effect, that the purchaser is aware of.

The issue that gave rise to legislation on bidding was the once overt practice of antique dealers to nominate one of their number to bid on certain lots, and then retire to a local pub to hold a second auction. Whilst this probably still takes place from time to time, it is no longer a visible activity.

The requirement of joint bidders to formally notify the auctioneer does not in practice occur, except perhaps in very high value situations. Illegal practice often occurs when dealers who know each other well chat to each other prior to a sale or sit next to each other during a sale and make informal verbal arrangements. However, without a written record, it is effectively impossible to evidence a prosecution.

There is also a practice known as 'lighthouse' bidding. This typically occurs when a dealer has a very strong interest in a lot, and shows it by sticking his arm firmly in the air and keeping it there during the bidding process, in view of as many people as possible in the auction room.

On seeing this, many dealers will stay their bids, in hope of reciprocal favours.

Bidding in this manner is not illegal, and with nothing written down, it would be impossible to evidence any sort of prosecution.

I'm confused. Are we saying that, in principle, if JDAW were to post here that he does not intend bidding on a load of Offley 63 magnums at Straker's, but would happily pay cost to the successful buyer, that he is then breaking the law? Or, in a slightly different scenario, if JDAW were to suggest that he would bid for all of us on these, and explicitly to state that we were doing this to prevent driving the price up, and that we would all take a share of the lots won (but without a further auction), would that also in principle be illegal?

How goes the pub, Tom?

I'm confused. Are we saying that, in principle, if JDAW were to post here that he does not intend bidding on a load of Offley 63 magnums at Straker's, but would happily pay cost to the successful buyer, that he is then breaking the law?

No, that would constitute either a joint bid, or a proxy bid, which is legal.

Or, in a slightly different scenario, if JDAW were to suggest that he would bid for all of us on these, and explicitly to state that we were doing this to prevent driving the price up, and that we would all take a share of the lots won (but without a further auction), would that also in principle be illegal?

An overt conspiracy to depress an auction price is dangerous territory. However, an agreement to bid jointly and then divvy up the proceeds without a secondary auction is perfectly OK.

uncle tom wrote:An overt conspiracy to depress an auction price is dangerous territory. However, an agreement to bid jointly and then divvy up the proceeds without a secondary auction is perfectly OK.

This is important for us. How can you be sure of this?

This is important for us. How can you be sure of this?

Never state that the objective of a joint bid is to get the bottles cheap. The objective is always to overcome logistical difficulties or lot quantities that do not suit individual needs.

uncle tom wrote:Never state that the objective of a joint bid is to get the bottles cheap. The objective is always to overcome logistical difficulties or lot quantities that do not suit individual needs.

Objection! He is leading the witness m'lud.

jdaw1 wrote:Casablanca: “Your winnings, sir”

Thanks Julian. I have added www.yourwinningssir.com to my growing list of domains!

woo woo

A side question: is it legal for a private individual to sell a bottle of alcohol to another private individual without a licence?

This might be even more unhelpful than the original question.

A side question: is it legal for a private individual to sell a bottle of alcohol to another private individual without a licence?

Alcohol has to be either sold by a person who holds a personal licence, or sold to a person who holds a personal licence.

I hold a personal licence..

uncle tom wrote:

A side question: is it legal for a private individual to sell a bottle of alcohol to another private individual without a licence?

Alcohol has to be either sold by a person who holds a personal licence, or sold to a person who holds a personal licence.

I hold a personal licence..

I have bought alcohol from several local auctions, I do not think any of them hold a licence. Should I report them?

I have bought alcohol from several local auctions, I do not think any of them hold a licence. Should I report them?

Licences are not hard to get. The personal licence is a one day course including exam, which is so basic I would probably have passed the exam without attending the course.

Should one report someone who doesn't have a licence and should have? If it's not doing any harm, why bother...?



Edit: the next four posts moved to Greed is good by jdaw1.

Compliance trading today, from Simmons & Simmons. Much more interesting than expected.

Questions after, so I asked about this. Wine is a traded instrument, on the likes of BBX. Could it be that not bidding, so that a friend does not overpay, would be construed as manipulative of the price?

No — hurray! No for two reasons. Not a financial instrument. But even if the relevant wine were listed on a regulated exchange (a wine merchant somewhere in the EU might hypothetically choose to be so regulated), it seems that not acting, not bidding, cannot of itself be manipulative.

jdaw1 wrote: ↑18:36 Mon 24 Jan 2022it seems that not acting, not bidding, cannot of itself be manipulative.

No longer my area, but I am surprised that market manipulation can only be achieved by an act rather than an omission so that a failure to bid could not be prohibited. It seems to me the question is really why there was a failure to bid: was it to secure a dominant market position and, if that were the intention, was the failure likely to have the effect of fixing prices or creating other unfair trading conditions?

2. The following behaviour shall, inter alia, be considered as market manipulation:
a. the conduct by a person, or persons acting in collaboration, to secure a dominant position over the supply of or demand for a financial instrument, related spot commodity contracts or auctioned products based on emission allowances which has, or is likely to have, the effect of fixing, directly or indirectly, purchase or sale prices or creates, or is likely to create, other unfair trading conditions;

EU MAR, Article 12.

[Clearly you should not rely on this back-of-the-envelope legal analysis for any purpose whatsoever.]

JacobH wrote: ↑09:36 Tue 25 Jan 2022

jdaw1 wrote: ↑18:36 Mon 24 Jan 2022it seems that not acting, not bidding, cannot of itself be manipulative.

No longer my area, but I am surprised that market manipulation can only be achieved by an act rather than an omission so that a failure to bid could not be prohibited. It seems to me the question is really why there was a failure to bid: was it to secure a dominant market position and, if that were the intention, was the failure likely to have the effect of fixing prices or creating other unfair trading conditions?

I was thinking pretty much along these lines. Not only that, but was the "failure to act" made public ahead of time?

Think of Elon Musk's power with crypto. Some of those coins rise and fall every time he simply mentions them. Can you imagine what would happen if he tweeted something along the lines of "there's no way I'm buying bitcoin right now."

That's a very different thing that simply not buying it. Stating that he's not going to buy could very easily be, and be seen as, an attempt to manipulate the market.

Broadcasting that you will not be bidding would surely be ‘an act’, where as privately discussing would not necessarily be so. If jdaw tweeted he would not be bidding so as not to inflate the price for a friend (and any interested or potentially involved party actually read it), then that would be more of an act that could influence the bidding, through information that was stated prior to the auction, and a provable one, rather than a private agreement that would not have the same potential influence.