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Italy’s financial regulator has penalised two Dutch high-speed traders for illegally short selling shares in Saipem after the oilfield engineer botched a €2bn fundraising in 2022.
Consob on Tuesday said it had issued combined fines of €4.7mn and ordered the return of the €4.9mn in total profits made by Amsterdam-based Optiver and Flow Traders for so-called naked short selling, where traders bet on stocks falling without borrowing them in advance. The practice is banned in Europe and the US.
The agency said the two had “massively operated through naked short selling on Saipem shares during the company’s hyper-dilutive capital increase” of July 2022.
Two years ago shares in the ailing Italian company slumped 70 per cent after it failed to raise €2bn from shareholders, even though its biggest holders, state-controlled oil major Eni and Cassa Depositi e Prestiti (CDP), pitched in.
It marked Saipem’s second failed attempt at raising capital after a botched attempt to secure €3.5bn from shareholders in 2016 and the underwriting banks were left holding the outstanding shares.
According to the regulator, in July 2022 Optiver traded nearly 9.5mn Saipem shares, or 44.3 per cent of the company’s share capital, through stock options in two days. Flow Traders traded 7.2 per cent of Saipem’s share capital on July 12.
Neither company “informed Consob or the market therefore violating transparency rules prescribed in European short-selling regulations,” the regulator said.
Under European law, short positions worth more than 0.5 per cent of a company’s share capital must be publicly disclosed, although there are exemptions for market makers.
Optiver and Flow Traders are two of Europe’s biggest high-frequency trading companies, and typically make money from facilitating trading between buyers and sellers of securities.
Consob said Optiver made a profit of €2.7mn from the trades and Flow Traders a €2.2mn profit. The regulator said such profits were “illegal” and ordered the companies to return them.
Optiver said it was in compliance with its requirements to provide competitive prices and comparable order sizes for both buyer and sellers.
It added that it considered all of its Saipem transactions “were covered by the relevant market-making exemption, and therefore we disagree with the Consob sanction”.
The Dutch group said it was considering an appeal. “We take our duties as a market maker, as well as compliance with legal and regulatory provisions, extremely seriously, and we remain committed to working co-operatively with regulators and exchanges,” it said in a statement.
Flow Traders did not immediately respond to a request for comment.
During the 2022 Saipem capital increase, the Italian regulator had warned groups to comply with the existing regulations. Consob’s decision comes after a two-year long investigation.
Additional reporting by Nikou Asgari in London