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19-125MR Macquarie Securities pays $300,000 infringement notice
Macquarie Securities (Australia) Limited (‘Macquarie’) has paid a penalty totalling $300,000 to comply with an infringement notice given by the Markets Disciplinary Panel (‘the MDP’).
The MDP had reasonable grounds to believe that Macquarie contravened the market integrity rules that deal with the provision of regulatory data to ASX and Chi-X.
Over a four-year period from July 2014 to July 2018, Macquarie transmitted approximately 42 million orders to ASX and Chi-X that included incorrect regulatory data or omitted required regulatory data. Over the same period, Macquarie also submitted approximately 377,000 trade reports to ASX and Chi-X with the same deficiencies.
The kinds of regulatory data that was incorrect or missing was information about:
- ‘capacity’: a notation to identify whether Macquarie was acting as principal or agent;
- ‘origin’: a notation to identify the person on whose instructions Macquarie was acting; and
- ‘intermediary’: the AFSL number of an intermediary using Macquarie’s automated order processing system.
The MDP emphasised that the provision of accurate regulatory data enhances market transparency and ensures an orderly market. The provision of incorrect or missing regulatory data to market operators impedes informed regulatory decision-making by market operators and by ASIC.
The MDP found that while Macquarie intended to comply with the market integrity rules, there were weaknesses in the configuration and integration of Macquarie’s systems, its processes for
on-boarding new clients and its control framework.
The MDP considers Macquarie’s conduct to be negligent, having regard to Macquarie’s poor design and implementation of updates to key systems, the high number of orders and trade reports containing incorrect or missing data, the multiple categories of incorrect or missing data and the length of time the problems persisted without detection by Macquarie.
Given Macquarie’s scale, market share and high market flows, the MDP considers that market participants such as Macquarie have greater potential and capacity to undermine market integrity. A market participant such as this should carry a greater responsibility to properly manage the risks that flow from their conduct. If that risk is poorly managed, the financial consequences to the market participant should be commensurately greater.
The MDP noted that, once Macquarie became aware of the scale of the issues, which it reported to ASIC, it undertook a comprehensive review to identify the causes, and promptly implemented remedial measures.
The compliance with the infringement notice is not an admission of guilt or liability, and Macquarie is not taken to have contravened subsection 798H(1) of the Corporations Act.