MIU - Issue 150 - July 2023

Markets Disciplinary Panel imposes record $4.5 million penalty

Openmarkets Australia Limited (Openmarkets) has paid the largest ever penalty imposed by the Markets Disciplinary Panel (MDP) of $4.5 million and entered into an enforceable undertaking to comply with an infringement notice issued by the MDP.

Openmarkets has a history of compliance failures (including a 2017 MDP infringement notice) which the MDP described as being ‘very poor’ and an aggravating factor affecting the outcome.

The MDP was satisfied that Openmarkets contravened a series of market integrity rules, including those related to placing suspicious orders, system filters, failing to notify ASIC of suspicious orders, unprofessional conduct, reconciliation of trust accounts, and adequacy of resources. Details of the MDP’s findings are contained in the media release below.

This outcome sends a clear message to market participants that breaches of market integrity rules will result in substantial penalties that should not be seen as a cost of doing business.

The MDP would have imposed a significantly higher penalty, but they reduced the total amount due to factors that included Openmarkets entering into an enforceable undertaking and not contesting the alleged contraventions.

The enforceable undertaking requires Openmarkets to appoint an independent expert to assess, report on and identify any necessary remedial actions relevant to the adequacy of Openmarkets’ organisational and technical resources and the design and operational effectiveness of its arrangements, relating to trade surveillance, client on-boarding and client money.

Compliance with the infringement notice is not an admission of guilt or liability, and Openmarkets is not taken to have contravened section 798H(1) of the Corporations Act 2001.

Market participants are reminded that, from 1 July 2023, penalty unit values for breaches of market integrity rules have increased from $275 to $313.

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FTX Australia’s AFS licence cancelled

We’ve cancelled the Australian financial services (AFS) licence held by FTX Australia Pty Ltd (FTX Australia), effective from 14 July 2023.

The terms of the cancellation include provisions that, until the end of 12 July 2024:

  • FTX Australia may provide limited financial services that relate to the termination of existing derivatives with clients, and
  • the cancellation has no effect on requirements for FTX Australia to continue as a member of Australian Financial Complaints Authority, and to have arrangements for compensating retail clients.

On 11 November 2022, John Mouawad, Scott Langdon and Rahul Goyal of KordaMentha were appointed as voluntary administrators of FTX Australia and its subsidiary, FTX Express Pty Ltd, which operates a digital currency exchange not regulated by ASIC.

On 14 November 2022, we suspended FTX Australia’s AFS licence until 15 May 2023, which was subsequently extended to 24 July 2023.

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ASIC to host industry roundtable in support of ASX’s CHESS replacement project

We’ve requested that ASX establish a high-level industry advisory group to support ASX’s CHESS replacement project. It’s proposed that this group is independently chaired and will advise on significant strategic clearing and settlement issues relating to cash equities trading in Australian markets with a focus on CHESS replacement.

The proposed solution will be discussed at an industry roundtable on 2 August 2023. The industry roundtable will be chaired by ASIC Chair Joe Longo, who will be joined by ASIC Commissioner Danielle Press and the Deputy Governor of the Reserve Bank of Australia, Michele Bullock. Attending the roundtable will be a small group of recognised industry leaders.

Our initiative follows longstanding industry concerns over the adequacy of ASX’s stakeholder engagement and governance. This includes ongoing concern with ASX’s management of intragroup conflicts of interests.

More than 12 industry leaders have been invited to attend the roundtable, drawn from different stakeholder sectors and fields of expertise. We expect each attendee to act in the public interest and to work constructively towards a solution.

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Last updated: 27/07/2023 04:17