Agency broker Instinet was fined $17.3 million HKD in Asia for algorithmic and electronic trading system failures, and $1.5 million USD for market access violations in the US last week.
The Securities and Futures Commission (SFC) in Hong Kong said the firm had breached a code of conduct related to the systems and its alternative liquidity pool, following a joint investigation.
The investigation found that on three occasions between December 2014 and January 2016 adequate controls were not in place to prevent inaccurate orders being generated and passed on to the market.
Non-proprietary orders also received execution priority over proprietary orders within its alternative liquidity pool, alongside general failures to maintain risk management controls and the smart order routing of its electronic and algorithmic trading systems.
When deciding on the penalty, the SFC said it took into consideration that Instinet fully cooperated with the regulator and carried out independent reviews to identify problems with its systems.
Instinet was also penalised in the US last week by the Financial Industry Regulatory Authority (FINRA), and major exchange operators including Nasdaq, NYSE and IEX, for market access violations.
The firm was ordered to pay $1.5 million after the exchanges found inadequate risk management controls and procedures designed to prevent duplicate orders, orders that exceed capital thresholds, or inaccurate messaging activity.
The failures meant that potentially manipulative trading activity went undetected and erroneous orders were entered on the exchanges.
“This case demonstrates the importance of reasonable market access procedures to appropriately monitor for errors and risks that can be harmful to the integrity of our securities markets,” said FINRA and the exchanges in a joint statement.
*The headline of this article has been amended to reflect the fact the two fines were imposed in different currencies.