Following an Australian Securities and Investments Commission (ASIC) investigation, the Markets Disciplinary Panel (MDP) has fined Macquarie Bank a record $4.995 million for failing to prevent suspicious orders being placed on the electricity futures market.
In a statement on Wednesday, the corporate regulator said Macquarie breached market integrity rules by permitting three of its clients to place suspicious orders on as many as 50 occasions, from January to September 2022 – a period of unprecedented volatility in energy markets globally.
Each order displayed characteristics of an intention to “mark the close”, meaning each order was placed within the last minute of market close, impacting the daily settlement price, in a direction favourable to the client’s existing interest in that contract. According to ASIC, MDP felt Macquarie should have suspected each of the 50 orders were submitted with the intention of creating a false or misleading appearance in the market.
“The record penalty imposed by the MDP reflects the serious, prolonged and potential systemic failures by Macquarie to detect and prevent suspected manipulation in the ASX 24 market for energy derivatives. Macquarie is the largest market participant in energy derivatives and given its role as a gatekeeper, it must ensure suspicious orders are not permitted to be placed on our markets,” ASIC chair Joe Longo said.
Longo shared that ASIC put Macquarie on notice about suspicious orders placed by its clients on numerous occasions, and it “repeatedly failed” to take timely action to address the conduct of its clients and the gap in its surveillance capability. Namely, the regulator is believed to have contacted Macquarie on six separate occasions to alert it to ASIC’s concerns.
“The consequences of manipulating energy markets can have a detrimental flow on impact to supplier funding costs and, in turn, energy prices. This can lead to higher energy bills for consumers who are already struggling with the cost of living,” the chair said.
The MDP found that Macquarie’s failure to respond to ASIC’s concerns in the context of the heightened need to monitor the electricity futures market was an aggravating factor in determining the size of the penalty.
Further, the MDP found Macquarie had failed to appreciate the seriousness of its obligations as a market participant to act promptly and appropriately upon what were obvious risks of deficiencies in its surveillance system and had not, at the time, taken full ownership or responsibility for its conduct.
