Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Macquarie fined for failing to catch irregular trading

Macquarie fined for failing to catch irregular algorithmic trading


By Paul McBeth

March 14 (BusinessDesk) - Macquarie Securities has been publicly ticked off and fined $20,000 for failing to discover that one of its clients with direct market access made more than 100 algorithmic trades over a 10-month period without a change of ownership.

The broking house and NZX settled last month after the stock market operator conducted an investigation in 2018 that found 102 trades had been made where Macquarie's client was on both sides of the deal. Listing rules require there to be a change of ownership to prevent a person from creating a false appearance of trading interest and undermining the market's integrity.

The problem came up because the Macquarie client was using separate algorithmic trading strategies that made opposing decisions about a particular stock, the NZ Markets Disciplinary Tribunal said today in approving the settlement.

Macquarie's filters designed to prevent this kind of trading weren't up to the task, and the tribunal found the broking house didn't have the systems in place to catch trades below a certain volume threshold.

"The tribunal has stated that adequate systems are particularly important given the increase in automated trading, including through the use of algorithms," it said.

However, the small size of the trading volumes was a mitigating factor in that they didn't have the potential to impact the market, and the trades themselves didn't distort prices.



While Macquarie wouldn't have discovered the trading if the NZX hadn't raised an issue, the tribunal said the broking firm took steps to put controls in place to prevent that type of trading from happening again and now has an underlying client identification system to stop trades where ownership doesn't change.

"This fix is unique to MAQA (Macquarie) and makes it a leader in the industry," the tribunal said.

The broking firm was also ordered to pay $5,400 of NZX costs, and costs for the tribunal.

The censure comes after the tribunal penalised Craigs Investment Partners in October for failing to adequately monitor algorithmic trading by one of its customers with direct market access. That client also made a series of algorithmic-based trades where ownership didn't change.

A greater volume of trading is now automated as algorithms dictate a higher frequency of transactions. NZX's 2018 metrics showed a 60 percent jump in the number of equity trades from a year earlier, even as the value shrank 13 percent.

(BusinessDesk)

ends

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Tax Bill Passes, Drops: “An End To Unnecessary Secondary Tax”

“The changes mean Inland Revenue will more closely monitor the tax paid by wage and salary earners through the year. If it appears the worker is being over taxed, Inland Revenue will suggest a more suitable PAYE tax code tailored to that worker.” More>>

ALSO:

Ethiopian Airline Crash: Boeing 737 Max Aircraft Operations Temporarily Suspended

New Zealand’s Civil Aviation Authority has suspended the operation of Boeing 737 MAX aircraft to or from New Zealand. Currently this affects only one operator, Fiji Airways. There are no other airlines that fly this aircraft type to New Zealand. More>>

ALSO:

Sorting Out DNA: Crime-Busting Software Wins Top Science Prize

Software developed in New Zealand that has contributed to identifying suspects in tens of thousands of criminal cases around the world has won the 2018 Prime Minister’s $500,000 Science Prize. More>>

ALSO:

In The High Court: IRD Wins Tax Avoidance Case

Inland Revenue has won a High Court case against Eric Watson’s Cullen Group over a nearly $52 million tax debt. More>>

ALSO:

Insurers Withdraw From Market: Plea For EQC Rethink

A consumer watchdog wants the government to rethink the Earthquake Commission (EQC) as more people are pushed out of getting property and contents insurance. More>>

ALSO:

Women's Day: New Zealand Rated Third Best In OECD For Working Women

New Zealand has been rated among the top countries in the world for working women. The Women in Work Index rated New Zealand third in the OECD and it was the only country outside Europe to make the top 10. More>>

ALSO: