Macquarie Securities has paid a fine of $126,000 over rules it broke while acting as the broker for a buy-back for an ASX-listed firm.
The ASIC Market Disciplinary Panel (MDP) stated it has reasonable grounds to believe that Macquarie Securities contravened rule 3.3.1(b) of the ASIC Market Integrity Rules (Securities Markets) 2017 by entering into a market transaction that was not in accordance with the client’s instructions.
This is the first matter being considered by the Market Disciplinary Panel under the new penalty regime applying to conduct after 13 March 2019.
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.
Macquarie Securities enabled a participant preferencing functionality in ASXC under which its orders would be satisfied before any existing unmatched orders of other participants, unless the unmatched orders have price priority.
Macquarie Securities was obliged to ensure it executed orders as directed by the client in the ordinary course of trading.
According to the MDP, the use 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.
Macquarie Securities has employed intervening measures to avoid such circumstances in relation to orders on ASXC, but due to a technical issue with the algorithm, the intervening measures failed on one of the company’s orders.
A purchase of 1.2 million shares at $2.465 on 6 May 2019 on ASXC raised the alarms, not being in the ordinary course of trading as Macquarie Securities’ sell order, which traded with its buy order, was preferenced ahead of two existing sell orders that were submitted by other participants and 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.
