Societe Generale Securities Australia fined $3.9m for market gatekeeper failures
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The news: Financing and advisory firm Societe Generale Securities Australia has been fined $3.88 million by the corporate regulator's market disciplinary panel (MDP) for failing to prevent suspicious orders from being placed on the electricity and wheat futures market.
The numbers: SocGen was found to have breached market integrity rules by allowing two of its clients to place 33 suspicious orders from May 2023 to February 2024.
The context: Each order displayed characteristics of an intention to ‘mark the close’, meaning they were placed within the last two minutes before market close to influence the daily settlement price for the client’s benefit.
The orders were placed during a volatile period in global energy and wheat markets caused by supply issues, including the Russia-Ukrainian War, creating ripe conditions for unscrupulous trading activity aimed to take advantage of and manipulate markets.
The Australian Securities and Investments Commission (ASIC) said this marks the regulator's fifth enforcement action in 15 months relating to alleged manipulation in electricity and wheat futures on the ASX 24 Market.
Manipulation of the daily settlement price of electricity and wheat futures contracts has the potential to impact supplier funding costs, and in turn electricity and wheat prices for consumers, ASIC said.
The MDP — a peer review and enforcement body within ASIC — found SocGen should have suspected that all 33 orders were submitted with the intention of creating a false or misleading appearance in the market.
In its decision, the MDP noted market participants such as SocGen must be aware of, and responsible for, orders placed by their clients including orders placed through direct market access.
The MDP found SocGen to be reckless in in failing to prevent further suspicious orders following ASIC’s repeated warnings.
The MDP was also alarmed that the circumstances indicated a lack of effectiveness of SocGen’s compliance and surveillance functions to detect and address manipulative market behaviour. This included a lack of training, skills and management oversight to adequately monitor the ASX 24 electricity and wheat futures market.
What they said: "This is about integrity and confidence in our markets that can have real world impacts on electricity and wheat prices," said ASIC chair Joe Longo.
"ASIC contacted SocGen on five occasions in 2023 to serve notices, ask questions or raise concerns about volatility in futures markets and suspicious orders placed by its clients.
"Despite ASIC’s contact, SocGen failed to take timely and effective action, and permitted additional, suspicious orders to enter the market.
"SocGen’s lack of response and inadequate remediation were made more significant because they are the second largest participant in the ASX 24 Market."
The source: ASIC
