Euronext Paris and high-frequency trader Virtu Financial
have been fined €5 million each by the French regulator for risking the
orderliness of the Paris market.
The Authorité des Marchés Financiers (AMF) found that in
2009, Virtu Financial Europe – known as Madison Tyler Europe at the time – was using
algorithms that rapidly placed and cancelled orders, which created distorted
representations in order books which created disruption for other market
AMF analysis of Madison Tyler’s trading activity across 27 CAC
40 securities found that the firm accounted for 62.7% of all messages on
Euronext Paris but just 2% of its trades. Its algorithm operated so quickly that 66% of its orders
lasted less than one second, while 25% lasted for less than 10 milliseconds.
In conclusion, the AMF said: “Madison Tyler Europe's trading
practices had allowed it to secure a dominant position on the Euronext Paris,
BATS, CHI-X and Turquoise platforms for the 27 securities in question, giving
rise to unfair trading conditions for other participants.”
It also found Euronext Paris had granted Madison Tyler
Europe exemption from penalties applicable to exceeding the ratio of orders
placed compared to trades executed, which at that time was 100:1.
This exemption, the AMF said, enabled Madison Tyler Europe
to improve its algorithms and that Euronext had not operated with neutrality
and impartiality in accordance with market integrity.
Both firms were each fined €5 million for the regulatory
Euronext has announced it plans to appeal the decision,
claiming the fine was “particularly open to dispute, totally disproportionate
and completely anachronistic.”
Stéphane Boujnah, CEO and Chairman of the
managing board of Euronext, added: “[The fine] concerns initiatives undertaken
by NYSE Euronext between 2009 and 2010, in the midst of the financial crisis.
Since 2014, Euronext has been an independent European company. Today Euronext’s
professional practices are ever more transparent, more regulated and more
secure to guarantee the best quality service to all of our clients.”