Credit Suisse Slapped with $170,000 Penalty for Automated Lapses

Credit Suisse Limited paid $170,000 following an infringement notice from ASIC.

Credit Suisse Equities Limited, Credit Suisse’s Australian subsidiary, forked over a penalty of $170,000 following an infringement notice from the Markets Disciplinary Panel (MDP), per an Australia Securities and Investments Commission (ASIC) filing.

The MDP operates as ASIC’s forum for disciplinary action against participant and market operators for alleged breaches of market integrity rules. The body is peer reviewed, and consists of an assortment of part-time members with relevant market or professional experience.

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The infringement notice stemmed from a discrepancy surrounding Credit Suisse Limited’s automated filters, as part of its automated order processing (AOP) systems. More specifically, the MDP believed that Credit Suisse had gone against specific regulations, i.e. subsection 798H(1) of the Corporations Act 2001, thereby failing to comply with Rule 5.6.1(1) of the ASIC Market Integrity Rules (ASX Market) 2010. This rule specifically requires trading participants to utilize appropriate automated filters for their AOP systems.

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Five-Year Period

Moreover, back in April 2016, Credit Suisse also came into conflict with these rules after a client of the group accidentally entered orders in relation to options market contracts via the AOP system that referenced an incorrect limit price. This episode showed that a number of transactions took place at prices that were 96% below the extreme trade range reference price for those products – the orders were cancelled soon after entry.

On the MDP’s part, it asserted that these orders were allowed to proceed through the market given that Credit Suisse did not utilize the appropriate filters to effectively determine limit price appropriateness for these respective options market contracts. As such, Credit Suisse failed to implement these filters for a period of more than five years, which included upwards of 9,800 orders for option market contracts entered via its AOP system.

Following the infringement notice and monetary penalty of $170,000, the MDP also warned that any repeated conduct of a similar vein is likely to incur much higher penalties being specified in subsequent infringement notices for Credit Suisse Limited.

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