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Macquarie Securities's Markets Disciplinary Panel AUD300 penalty

BIScom Subsection: 
Nigel Morris-Cotterill

It's not the best way to start the week, much less the month. The first notice from Australian regulator The Australian Securities and Investment Commission tells that Macquarie Securities (Australia) Limited has been issued a penalty notice : ASIC "believes" the company "contravened" market integrity rules. The failure was of design, implementation and maintenance of compliance systems, not an intention to not comply, ASIC says. Plus ça change in so much of the financial sector, then.

According to the statement "The MDP found that while Macquarie intended to comply with the market integrity rules, there were weaknesses in the configuration and integration of Macquarie’s systems, its processes for on-boarding new clients and its control framework."

That amounted to negligence, particularly given "Macquarie’s poor design and implementation of updates to key systems."

But that's not all: the reporting system was, to be polite, either inadequate or ignored. ASIC specifically drew attention to "the high number of orders and trade reports containing incorrect or missing data, the multiple categories of incorrect or missing data and the length of time the problems persisted without detection by Macquarie."

Over a four-year period from July 2014 to July 2018, Macquarie transmitted approximately 42 million orders to ASX and Chi-X that included incorrect regulatory data or omitted required regulatory data. Over the same period, Macquarie also submitted approximately 377,000 trade reports to ASX and Chi-X with the same deficiencies.

The kinds of regulatory data that was incorrect or missing was information about:

- ‘capacity’: a notation to identify whether Macquarie was acting as principal or agent;
- ‘origin’: a notation to identify the person on whose instructions Macquarie was acting; and
- ‘intermediary’: the AFSL number of an intermediary using Macquarie’s automated order processing system.

The whole situation is made worse because Macquarie has such a large market share that it has "greater potential and capacity to undermine market integrity."

That, the MDP said, puts a higher burden of responsibility on large market participants because the financial consequences to the market are "commensurately greater" if that risk is poorly managed.

Basically, the MDP says that a major player can cause systemic failure or chaos and, therefore, its obligations to the market are greater than its obligations to its customers.

With that level of arse-kicking from the regulator, based upon such signal failures both of principle and actual conduct, maybe the announcement of an AUD300,000 penalty isn't such bad news after all. It could have been much worse.

Further Reading: https://download.asic.gov.au/m...