Commonwealth Securities (ComSec), an Australian broker, has been fined A$50,000 by the regulator for conducting trades which were not compliant with crossing rules.
The Australian Securities and Investments Commission’s (ASIC) Markets Disciplinary Panel (MDP) ordered the securities trading arm of the Commonwealth Bank of Australia to pay the fine after it found 48 crossing infringements where there were no change in beneficial ownership and where the efficiency and integrity of the ASX was allegedly impacted.
The rule allegedly contravened requires trading participants ensure their trading messages do not interfere with the efficiency and integrity of the market or the proper functioning of a trading platform.
The MDP claims between 4 August 2010 and 20 January 2011, ComSec, crossed orders in Oaks Hotels & Resorts Limited (OAK) for a client whereby 48 orders were in the client’s name and 48 were in an account for the client and his wife.
“The 48 crossings involved no change in beneficial ownership (NCBO) and falsely represented 11.88% of bonafide volume in OAK, creating the misleading appearance of active trading,” stated a release from ASIC. “This is inconsistent with the efficiency and integrity of the market as participants are likely to assume that the transactions reflect genuine supply and demand and act accordingly.”
ComSec had filters and reviews in place to identify and prevent the orders but ASIC said they were not designed to filter transactions from accounts that were connected but had different account numbers. However ASIC said three of the 48 crossings did trigger unrelated filters, but ComSec’s designated trading representatives (DTR) subsequently approved them after review.
“The conduct on the part of ComSec appears to have been reckless,” ASIC said in a release. “Three of the orders triggered filter alerts, and although this was not for NCBO reasons, the orders were diverted to the relevant DTR for review who reviewed and approved them, despite the orders being NCBO transactions.”
ASIC believed that while ComSec did have filters and reviews in place regarding NCBO orders, the filters and reviews were inadequate as they were designed only to identify and filter NCBO transactions in which the account number was the same on both sides.