The Australian Securities and Investments Commission (ASIC) has fined the Australian division of Japanese investment bank Nomura A$30,000 (US$30,791) for the entry of two orders that were deemed as not being “fair and orderly”, as per market rules.
The charge relates to Nomura’s sale in the security Alumina Limited (AWC) on 18 March 2011. Nomura is alleged to have contravened the Corporations Act 2001 and rule 5.9.1 of the ASIC market integrity guidelines, which state that a market participant must not engage in activity that results in a market for a product not being both fair and orderly.
On 18 March 2011, a trader at Nomura entered a parent order to sell 1 million AWC shares, using the Iress execution platform IOS Plus. The parent order was defined by ASIC as an order entered by Nomura that was not transmitted directly on the market but subsequently sliced by the firm into child orders before being deployed.
Instead of entering the parent order as described, the trader entered the order straight onto the market. The order traded immediately, moving the price of AWC from A$2.22 down to A$2.16, a 2.7% decrease.
Less than one minute later, the trader entered a second order to sell 1 million AWC at A$2. The second order was entered by the trader in error when he did not see the first order appear in the system as a parent order. He was under the mistaken belief that the first order had not been registered in IOS.
The second order also traded immediately and moved the price of AWC from A$2.20 to A$2.00, a 9% decrease. ASIC determined that this action had the potential to damage the reputation and integrity of the market.
Nomura did not contest the alleged breach.