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UK watchdog plans to ban three traders over Italian bond market abuse

FILE PHOTO: FCA logo is seen at their head offices in London

By Kirstin Ridley

LONDON (Reuters) - Britain's markets regulator said on Wednesday it planned to ban three former Mizuho International bond traders from Britain's financial services industry for alleged dishonesty and deliberate market manipulation of Italian bond futures in 2016.

The Financial Conduct Authority (FCA) said it also planned to fine former managing director Diego Urra 395,000 pounds ($480,800) and former senior rates trader Jorge Lopez Gonzalez and Poojan Sheth, once an associate, 100,000 pounds each.

The FCA said the trio was contesting the decision, which will now be considered by the independent Upper Tribunal, a body that deals with challenges to FCA notices. Reuters was trying to reach the men's legal representatives.

The FCA alleges the men manipulated the market by placing large orders for BTP Futures - contracts to buy Italian government bonds in the future - that they did not intend to execute in June and July 2016. They then placed small, genuine orders on the opposite side of their order books.

Having created the illusion of additional supply or demand, they then cancelled the larger orders, the FCA said.

"This market manipulation was serious and directly undermined the integrity of the market," the FCA said in documents published on Wednesday. "Other market participants would likely have altered their trading strategies as a result of the false and misleading signals given by the large orders."

Mizuho International, the London-based securities and investment banking arm of Japan's Mizuho Financial Group, reported the events to the FCA in 2016, cooperated fully and was cleared of any wrongdoing three years later, a spokesperson said.

"Mizuho International is not party to these proceedings in relation to former employees and the FCA has confirmed there are no other investigations or actions pending in respect of these matters," the representative added.

($1 = 0.8216 pounds)

(Reporting by Kirstin Ridley; Editing by Crispian Balmer)