Fines

ASIC Fines Australian Investment Exchange, Etrade, for Regulatory Infringements

Etrade and AUSIEX caused market disturbance for two companies’ stocks because of order mispricing

The Australian Securities and Investments Commission (ASIC) has fined Etrade Australia Securities and Australian Investment Exchange (AUSIEX) for failure to comply with two infringement notices handed to the two companies by the markets Disciplinary Panel.

Mispriced Orders

Etrade was penalized for mishandling a client order for the purchase of a lot of put options. According to ASIC, the price Etrade set for the securities was erroneously set at AUD 36. Then Etrade’s Designated Trading Representative submitted the order to the ASX trading platform, misreading the bid price as AUD 0.36. The bid price for the securities of that company, Orica Ltd., at that time was AUD 0.34. The ask was AUD 0.395, and the last traded price was AUD 0.355. The misreading resulted in market disturbance of Orica’s securities, for which Etrade was fined AUD 65,000.

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Lack of Automated Order Filters

AUSIEX, on the other hand, was penalized with a fine of AUD 130,000 for failure to have some specific organizational and technical resources in place, ASIC said. This failure once again resulted in the mishandling of a trade order that disturbed the market, this time for Westpac.

The order submitted to AUSIEX’ trading platform was for a lot of call options on Westpack, at a price of AUD 0.005. The bid price for these contracts at the time was AUD 0.475 and the last traded price immediately before the submission of the erroneous order was AUD 0.520. The discrepancy resulted in the market for Westpac options not being “fair and orderly”.

ASIC said that AUSIEX needed to have automated filters as well as processes to detect authorized persons submitting orders without such filters in place.

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