Pershing Securities Australia Pty Ltd (“Pershing”) has paid a penalty of $40,000 to comply with an infringement notice given to it by the Markets Disciplinary Panel (“MDP”).
The MDP had reasonable grounds to believe that Pershing had contravened subsection 798H(1) of the Corporations Act by failing to comply with Rule 5.6.1(1) of the ASIC Market Integrity Rules (ASX Market) 2010. This Rule requires trading participants to have appropriate automated filters for their automated order processing (AOP) systems.
In December 2015, a market-making client of Pershing with direct market access through their AOP system had entered orders into the trading platform of ASX in relation to exchange traded bond units. This resulted in a trade that was 99.9% from the last traded price and involved no change in beneficial ownership.
Pershing used certified AOP market filters. However, when it initiated a new connection to enable the client to use its AOP system, the new connection was incorrectly mapped to a destination that did not contain the certified AOP market filters. Although Pershing tested the operation of the filters in the test environment, it failed to sufficiently check whether the filters were operating correctly in the live, production environment.
While the conduct gave rise to an isolated incident, which had a minimal market impact (the trade was cancelled within minutes), appropriate automated filters had not been in place for a period of approximately three months for this client.
The compliance with the infringement notice is not an admission of guilt or liability, and Pershing is not taken to have contravened subsection 798H(1) of the Corporations Act.