Australia's securities regulator slapped Societe Generale Securities Australia with a $3.88 million penalty for allowing clients to place suspicious orders that may have manipulated electricity and wheat futures prices.

The Markets Disciplinary Panel found the French bank's local unit failed to prevent two clients from submitting 33 questionable trades between May 2023 and February 2024. The orders were designed to influence daily settlement prices just before market close, a practice known as “marking the close.”

Societe Generale's Australian Unit Hit with $3.9M Fine for Market Surveillance Failures

Societe Generale Securities was the second-largest participant in Australia's ASX 24 futures market as of June 2023, handling nearly 12% of total trading volume. The company is owned by Societe Generale SA, which ranks as the world's 19th largest bank by assets.

The penalty comes during heightened scrutiny of Australia's commodities markets. Global supply disruptions from the Russia-Ukraine conflict created volatile conditions that some traders apparently tried to exploit for profit.

“This is about integrity and confidence in our markets that can have real world impacts on electricity and wheat prices,” said Joe Longo, the Chairman of the Australian Securities and Investments Commission (ASIC).

This isn't Societe Generale's first run-in with Australian regulators. In 2020, the bank's local division was also fined for client money violations after improperly handling client funds between 2014 and 2017. The earlier case involved withdrawing client money from segregated accounts and depositing it with the bank's Hong Kong branch, which wasn't an approved institution under Australian law.

ASIC contacted Societe Generale five separate times in 2023 with notices, questions and warnings about suspicious client activity. Despite these alerts, the bank allowed additional questionable orders to reach the market.

Pattern of Late-Session Trading Raises Red Flags

The problematic trades shared several characteristics that should have triggered internal alarms, regulators said. All 33 orders were placed within the final minute before market close, with some submitted just seconds before trading ended.

Many of the orders matched against existing bids that had been sitting in the market for extended periods, suggesting they were placed to move prices rather than execute genuine trades. The timing consistently benefited the clients' existing positions, creating mark-to-market gains ranging from about $37,000 to $745,000 per order.

One client placed 16 electricity futures orders over two months, while another submitted 17 wheat futures orders across two separate periods. The price impacts ranged from 0.19% to 3.23% for electricity contracts and 0.37% to 2.23% for wheat futures.

The disciplinary panel found Societe Generale's conduct became increasingly problematic over three distinct periods. What started as “careless” behavior in the first phase escalated to “reckless” conduct by the final period, when the bank continued allowing suspicious trades despite repeated regulatory warnings.

“Market gatekeepers have a duty to keep our markets safe,” Longo said. “Missing suspicious orders puts the entire system at risk.”

Surveillance Systems Failed to Catch Misconduct

The case highlights weaknesses in Societe Generale's monitoring systems. The bank uses NASDAQ's SMARTS platform to flag potential misconduct, but staff reviewing the alerts lacked sufficient understanding of electricity and wheat futures markets to identify the suspicious patterns.

Five alerts were triggered for the electricity futures orders, but all were closed after initial review without escalation. Similarly, seven alerts related to wheat futures orders were analyzed and dismissed without further investigation.

The disciplinary panel criticized the bank for not activating a specific alert designed to catch closing-minute trades that could influence settlement prices. When regulators raised concerns, Societe Generale eventually turned on this “Entry of High Closing Bid or Low Closing Ask” alert, but it proved ineffective because staff reviewing the flags still lacked proper expertise.

“SMARTS is a tool that is only as good as its users' skills and knowledge,” the panel noted in its decision.

The bank eventually banned one client from trading in the final two minutes before market close, but only after ASIC's investigation was well underway. No similar restrictions were initially placed on the second client.

Fifth Enforcement Action in Energy Markets Crackdown

The Societe Generale penalty represents ASIC's fifth major enforcement action targeting alleged manipulation in electricity and wheat futures over the past 15 months.

The regulator's aggressive stance on commodities market manipulation has intensified since making it an enforcement priority in 2022. Recent cases highlight systemic issues with market surveillance across major financial institutions operating in Australia's futures markets.

Last September, regulators fined Macquarie Bank a record $4.995 million for similar gatekeeper failures. The case involved three clients placing suspicious orders in electricity futures markets. Notably, ASIC has since imposed additional license conditions on Macquarie after discovering further compliance failures, including 11 more instances of suspicious electricity futures orders that occurred shortly after the initial fine.

J.P. Morgan Securities Australia paid $775,000 in May 2024 for allowing suspicious wheat futures orders. That case involved COFCO International Australia using J.P. Morgan's platform to execute allegedly manipulative trades, which became the subject of separate civil proceedings launched by ASIC against COFCO in July 2024.

ASIC also launched civil penalty proceedings against Delta Power & Energy in June 2025 for allegedly manipulating electricity futures on 30 occasions in late 2022. The regulator claims Delta placed orders just before market close to improperly influence daily settlement prices, with internal documents showing board-level awareness of the strategy.

The regulator has made commodities market misconduct a priority as volatile global conditions create opportunities for abuse. Settlement prices for electricity and wheat futures can influence supplier funding costs and ultimately affect consumer prices.

Societe Generale did not contest the alleged rule violations and has paid the penalty. Under Australia's infringement notice system, payment does not constitute an admission of guilt, and the company is not considered to have violated the law.