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Tuesday 28 June 2016

16-204MR Macquarie Securities (Australia) Limited pays $120,000 infringement notice penalty

Macquarie Securities (Australia) Limited (“Macquarie Securities”) has paid a total pecuniary penalty of $120,000 to comply with an infringement notice given to it by the Markets Disciplinary Panel (“MDP”).

The MDP had reasonable grounds to believe that Macquarie Securities contravened subsection 798H(1) of the Corporations Act 2001 by reason of contravening  Rules 5.6.1 and 5.9.1 of the ASIC Market Integrity Rules (Chi-X Australia Market) 2011.

These Rules respectively provide:

5.6.1 A Market Participant which uses its system for Automated Order Processing must at all times:

  1. have appropriate automated filters, in relation to Automated Order Processing; and
  2. ensure that such use does not interfere with:
    1. the efficiency and integrity of the Chi-X Market;
    2. the proper functioning of any Trading Platform; or ..

5.9.1 A Market Participant must not do anything which results in a market for an Equity Market Product not being fair and orderly, or fail to do anything where that failure has that effect.  

In relation to the alleged contraventions of Rule 5.9.1:

  • Macquarie Securities had set the filter parameters for its Automated Order Processing system so that the parameters used to vet orders submitted during the open session state of the ASX Market were narrower than those that applied during the pre-open and pre-closing single price auction session states of that market. During the pre-open and pre-closing single price auction session states of the ASX Market, orders were vetted against the wider filter parameters, even where the Chi-X Market was in an open session state.
  • Two orders in relation to different classes of illiquid shares were submitted at a time when the Chi-X Market was in an open session state. As the wider filter parameters were in place at that time, the orders resulted in transactions on the Chi-X Market, which caused price increases of 567% for both classes of shares on both the Chi-X and ASX Markets. Had the narrower filter parameters been in place at that time, the Automated Order Processing System would have rejected the orders.
  • The MDP had reasonable grounds to believe that Macquarie Securities contravened Rule 5.9.1 on two occasions by creating a market for each class of share that was not fair and orderly.
  • The MDP specified a penalty of $30,000 for each alleged contravention.

In relation to the alleged contravention of Rule 5.6.1:

  • orders were submitted through the Automated Order Processing system at a time when the ASX Market was in a pre-closing single price auction session state but the Chi-X Market was in an open session state which had also resulted in transactions on the Chi-X Market in relation to shares in Telstra and Santos respectively.
  • as the wider filter parameters were in place at that time, the orders resulted in transactions on the Chi-X Market at prices which were more than 7% away from the respective prevailing  market prices of shares in Telstra and Santos. Had the narrower filter parameters been in place at that time, the Automated Order Processing system would have triggered a filter alert.
  • having regard to the transactions on the Chi-X Market in relation to both the illiquid shares as well as the Telstra and Santos shares, the MDP had reasonable grounds to believe that Macquarie Securities did not have in place appropriate automated filters to take account of a multi-market structure of competing exchange markets so as to ensure that use of the Automated Order Processing system did not interfere with efficiency and integrity of the Chi-X Market.
  • The MDP specified a penalty of $60,000 for the alleged contravention.

Download the infringement notice

The compliance with the infringement notice is not an admission of guilt or liability, and Macquarie Securities is not taken to have contravened subsection 798H(1) of the Corporations Act.

Last updated: 30/03/2021 09:33