ASIC Slaps Macquarie Securities with a Penalty of $126,000

Fazzaco learned that the Australian Securities and Investment Commission (ASIC)​ announced that Macquarie Securities (Australia) Limited (‘MSAL’) has paid a penalty of $126,000 to comply with an infringement notice given by the Markets Disciplinary Panel (‘the MDP’).

According to the press release, the ASIC MDP has reasonable grounds to believe that MSAL breached Rule 3.3.1(b) of the ASIC Market Integrity Rules (Securities Markets) 2017 (‘the Rules’) by entering into a market transaction that was not in accordance with the client’s instructions.

According to the press release, Macquarie Securities conducted part of the buy-back on ASX Centre Point (ASXC), a “dark” market operated by ASX. Participants may enter orders into the order book for ASXC, but they are not visible to the rest of the market before the orders are matched as trades.

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MSAL enabled a participant preferencing functionality in ASXC under which its orders will be satisfied before any existing unmatched orders of other participants, unless those unmatched orders have price priority.

Having as agent accepted the client’s instructions to conduct an on-market buyback for it, MSAL was obliged to ensure it executed orders as directed by the client in the ordinary course of trading.

The MDP considers the use by MSAL of participant preferencing to execute buy-back orders without intervening measures was very likely to lead to the execution of orders other than in the ordinary course of trading. Intervening measures adopted by MSAL to avoid such circumstances were employed in relation to orders on ASXC, but due to a technical issue with the algorithm used by MSAL, the intervening measures failed in relation to one of MSAL’s orders.

The MDP was satisfied that the purchase of 1.2 million shares at $2.465 on 6 May 2019 on ASXC was not in the ordinary course of trading as MSAL‘s sell order, which traded with MSAL’s buy order, was preferenced ahead of two existing sell orders on ASXC that were submitted by another participant and which had time priority.

But the MDP has said it is not satisfied that Macquarie Securities’ conduct around the buy-back transactions on ASXC resulted in the market for the shares not being fair and orderly. The company’s conduct did not affect the price of the shares and did not result in the other participant’s sell orders not being able to transact with Macquarie Securities’ orders.

Macquarie Securities has subsequently ceased using ASXC to effect buy-back trading.

Fazzaco earlier reported ASIC commenced proceedings in the Federal Court against Westpac Banking Corporation (Westpac) for insider trading.