Merrill Lynch pays $96k fine for contravention of ASX rules
Merrill Lynch Equities (Australia) Limited has paid a $96,000 infringement notice penalty after it filled an order that "had the potential to damage the reputation and integrity of the market".
The Australian Securities and Investments Commission (ASIC) revealed that Merrill Lynch's automated order processing (AOP) system failed to identify an order that resulted in class A non-voting common stock in News Corporation (NWSLV) tumbling by 97.6 per cent.
In a statement ASIC announced that on 28 February 2013, Merrill Lynch received an order to sell 35,334 NWSLV at $0.43, and the AOP system filter failed to identify that the order was significantly lower than the previous last traded price for the stock, which was $17.96.
Within eight seconds of the submission of the order to sell, one market transaction for 150 NWSLV was traded for $17.98, while a further 13 transactions were processed for a total of 14,486 unit at $0.43, before Merrill Lynch identified the error and cancelled residual part of the initial order to sell.
ASIC said that Merrill Lynch contacted the Australian Securities Exchange (ASX) to facilitate the cancellation of the relevant transactions, as they fell within the extreme cancellation range of the ASX Operating Rules Procedures.
ASIC's Markets Disciplinary Panel (MDP) ruled that Merrill Lynch had contravened rules 5.6.1 and 5.9.1 of the ASIC Market Integrity Rules, by failing to ensure that at all times is AOP system had in place an appropriate price filter.
"Merrill Lynch had a significant history of non-compliance with both the ASX Market Rules and the market integrity rules," the MDP said.
"Merrill Lynch had previously been sanctioned by the ASX Disciplinary Tribunal on 10 occasions since 2005."
ASIC also revealed that BBY Limited has paid a $90,000 infringement notice penalty after the MDP found that it had failed to ensure that its AOP system had in place the organisational and technical resources to record any changes to the automated filters without interfering with the efficiency and integrity of the ASX market or the proper functioning of its trading platform.
An ASIC investigation found that no AOP filters were applied to direct market access orders from 30 accounts over an eight month period.
AUTHOR
Nicholas O'Donoghue
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