Block trading breach! ASIC’s Markets Disciplinary Panel hands down $222,000 penalty to ABN AMRO

12 January 2023
Guy Edgecombe, Partner, Brisbane Daniel Maroske, Partner, Brisbane

On 7 September 2022, ASIC announced that its Markets Disciplinary Panel (MDP) had issued an Infringement Notice having determined that it had reasonable grounds to believe that ABN AMRO Clearing Sydney Pty Ltd (ABN AMRO) contravened subsection 798H(1) of the Corporations Act by failing to comply with Rule 3.4.2(1) of the ASIC Market Integrity Rules (Futures Markets) 2017 (Rules).

The MDP found that ABN AMRO registered a series of block trades in early 2021 contrary to Rule 3.4.2(1) which prohibits the aggregating of separate orders in order to meet the Minimum Value Thresholds. ABN AMRO’s conduct was found to be “careless”, rather than “intentional or reckless” and were fined a total of $222,000 (representing 1,000 penalty units).

Part 3.4.2 of the Rules provides that market participants must not aggregate separate Orders in order to meet Minimum Volume Thresholds. At the time of the orders in question, the relevant ASX24 Operating Rules Procedure (the Procedures) specified that a Minimum Volume Threshold of 200 lots. The Procedures relevantly provided that:

  • As per ASIC Market Integrity Rules, Trading Participants cannot aggregate smaller orders to make up a Block Trade Order, thereby satisfying the Minimum Volume Threshold. Block Trade Orders may only be aggregated where each individual order meets or exceeds the Minimum Volume Threshold.
  • On three occasions between 7 January 2021 and 15 April 2021, ABN AMRO registered block trades where individual orders comprising the aggregated Orders were less than the Minimum Volume Threshold.
  • Following the identification by ASIC of several unusual split allocations in the relevant trades, a section 912C Notice was issued to ABN AMRO and further details of the block trades were uncovered during ASIC’s investigation.

Ultimately, the MDP issued a penalty of $222,000 on ABN AMRO for allegedly failing to comply with the Rules in permitting the block trades in violation of the Procedures. In determining the appropriate penalty, the MDP had regard to the following factors:

  • The character of the conduct – which was held to be careless rather than intentional or reckless;
  • The consequences of the conduct – which were considered minor, with no evidence of persons suffering a loss as a result of the conduct;
  • Compliance culture – which was found to have some shortcomings, particularly around the reliance of hyperlinking within ABN AMRO’s relevant policies and procedures, and the absence of sufficient detail to alert a reader to the substance of the obligations under the Procedures and Rules;
  • Remedial steps – noting ABN AMRO had updated its procedures, enhanced in-house and external training, and strengthened the onboarding of clients’ traders.

In arriving at the penalty, the MDP noted that the penalty was at the low range and noted that the penalties imposed in relation to the alleged contraventions are significantly greater than the penalties that would have been imposed had the conduct occurred under the previous penalty regime, which applied in relation to conduct occurring before 13 March 2019.

No adverse finding was made in relation to Rule 2.2.8 (in relation to Supervisory procedures) and compliance with the Infringement Notice is not an admission of guilt or liability, and ABN AMRO is not taken to have contravened subsection 798H(1) of the Corporations Act.

While the issuing of Infringement Notices by ASIC’s MDP is a relatively infrequent occurrence, the $222,000 penalty issued on ABN AMRO is a timely reminder of the importance of having fit for purpose policies and procedures that align with an organisations obligations under the Corporations Act and, where applicable, ASIC’s Market Integrity Rules.

The $222,000 penalty for ABN AMRO follows the $110,250 penalty contained in the Infringement Notice complied with by BGC Partners (Australia) Pty Ltd in January 2022 for an alleged failure to comply with the pre-negotiated business order requirements under Rule 3.3.1A(1) of the Rules.

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Authored by: 

Guy Edgecombe, Partner
Daniel Maroske, Director

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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