ASIC: Credit Suisse Pays US$51.9K Penalty for NXXT Trades

The Australian Securities and Investments Commission (ASIC) announced this Friday that Credit Suisse Equities (Australia) Limited (Credit Suisse) has paid a penalty of $75,000 in order to comply with an infringement notice that was given by the Markets Disciplinary Panel.

Although Credit Suisse has complied with the infringement notice, it does so without admitting guilt or liability, and Credit Suisse is not taken to have contravened subsection 798H(1) of the Corporations Act.

Contravention of ASIC Market Integrity Rules

According to the statement, the Markets Disciplinary Panel had reasonable grounds to believe that Credit Suisse didn’t act in accordance with its clients’ instructions, thus contravening Rule 3.3.1(b) of the ASIC Market Integrity Rules (ASX Market) 2010 (ASX Rules).

In particular, ASIC claims that Credit Suisse was engaged as a broker on behalf of three clients to perform an on-market buy-back of shares. The MDP found that between the 6th of March 2017 until the 8th of November 2018, the Swiss-headquartered bank entered into a number of trades by matching orders on behalf of both its buying and selling clients. The firm did that rather than the matching of orders on an order book, ASIC said, and Credit Suisse reported these trades to the ASX as ‘Trades with Price Improvement’ (NXXT Trades).

ASIC Regulatory Guide 223 Guidance on ASIC market integrity rules for competition in Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term markets (RG 223) and the Regulatory Guide 265 Guidance on ASIC market integrity rules for participants of securities markets (RG 265), state that an NXXT Trade is not in the ordinary course of trading. Therefore, it is not a transaction permitted for an on-market buy-back.

“The MDP considered Credit Suisse’s conduct to be careless because its Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term desk employees were inadequately trained in relation to on-market buy-backs and were therefore unaware that NXXT Trades were not permitted during an on-market buy-back. Additionally, Credit Suisse’s surveillance systems had also failed to prevent the NXXT Trades from being executed,” ASIC said in its statement today.

Credit Suisse has taken remedial action

However, according to ASIC’s statement, Credit Suisse did report the NXXT Trades to ASIC and “took remedial measures by contacting its clients about the NXXT Trades”. Since the incident, the bank has provided further training for its execution desk employees and has updated its reminder emails sent to the relevant employees to not execute NXXT Trades during an on-market buy-back.

“The MDP was satisfied that Credit Suisse did not appear to derive any benefit from the conduct beyond the brokerage fees and commissions, and that the conduct did not cause financial loss to its clients or third parties,” the Australian regulator said today.