ASX derivatives market participant cops $3.8m fine | Australian Markets

The second-largest market participant on the Australian Securities Exchange’s (ASX’s) futures trading venue ASX 24 Market, Societe Generale Securities Australia (SocGen), has been fined $3.88 million for breaching market integrity guidelines associated to alleged manipulation in electrical energy and wheat futures.

An Australian Securities and Investments Commission (ASIC) investigation discovered SocGen allowed two of its purchasers to position 33 suspicious orders on the electrical energy and wheat futures market between May 2023 and February 2024.

The Market Disciplinary Panel (MDP), which handed down the fine, discovered every order was positioned within the final two minutes earlier than market close with the intention to “influence” the each day settlement price to benefit the consumer, thus creating “a false or misleading appearance in the market”.

In a assertion, ASIC mentioned any tried manipulation by market individuals of the each day settlement price of electrical energy and wheat futures could cause a ripple-effect on provider funding prices and costs for shoppers.

The timing of the suspicious orders comes during an ongoing period of world volatility in power and wheat markets attributable to provide chain points exacerbated by the Russia-Ukraine War.

“This is about integrity and confidence in our markets that can have real world impacts on electricity and wheat prices,” ASIC Chair, Joe Longo, mentioned.

“ASIC contacted SocGen on 5 events in 2023 to serve notices, ask questions or raise issues about volatility in futures markets and suspicious orders positioned by its purchasers.

“Despite ASIC’s contact, SocGen did not take well timed and efficient motion, and permitted extra, suspicious orders to enter the market.

“SocGen’s lack of response and inadequate remediation were made more significant because they are the second largest participant in the ASX 24 Market.”

The MDP mentioned market individuals like SocGen are accountable for orders positioned by their purchasers and famous SocGen’s “recklessness” in “failing to prevent further suspicious orders” regardless of a number of warnings from ASIC. The investigation additionally revealed “lack of effectiveness of SocGen’s compliance and surveillance functions to detect and address manipulative market behaviour”, together with “a lack of training, skills and management oversight to adequately monitor the ASX 24 electricity and wheat futures market”.

“Market gatekeepers have a duty to keep our markets safe. They have direct visibility over client trading and can prevent orders from being placed on the market,” Longo mentioned.

“Missing suspicious orders places your complete system at risk.

“Companies like SocGen must have appropriate preventative and detective tools and controls, including people with the right expertise as well as surveillance software, to ensure compliance.”

The motion in opposition to SocGen marks ASIC’s fifth enforcement motion within the final 15 months associated to manipulation of electrical energy and wheat futures on the ASX 24 Market. SocGen accounted for 11.8 per cent of the full traded quantity throughout the ASX 24 market, as of 30 June 2023.