QUICK FACTS
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Macquarie Bank Fine Amount: £13,031,400 (Macquarie Bank London Branch)
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Fine Date: 18 November 2024
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Violation Period: June 2020 - February 2022
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Primary Violation: Fictitious Trades
Macquarie Fine Overview
The Financial Conduct Authority (FCA) has fined Macquarie Bank Limited's London Branch (MBL) £13,031,400 for systems and controls failings that enabled a trader to conduct and conceal fictitious trading over a 20-month period. The case highlights deficiencies in the firm's internal control framework, particularly around trade monitoring, reconciliation processes, and broker quote verification.
Details of the Macquarie Fine
The enforcement action centers on activities that occurred between June 2020 and February 2022, during which a trader on Macquarie Bank's Metals and Bulks Trading Desk recorded 426 fictitious trades, attempting to conceal trading losses.
Initial Trigger
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In June 2020, the trader was asked to "de-risk" his Freight book due to escalating losses.
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He was "benched" for two weeks to observe the market and revisit positions.
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Rather than actually de-risk (which he admitted was possible but would take weeks), he began booking fictitious trades to make it appear he had reduced risk.
The Macquarie trader later described his acts as "an initial mistake made in response to being asked to de-risk the book, which he thought would only last for a day, but which then spiraled out of his control."
Fictitious Trading Strategies
The trader employed two main strategies thereafter:
Strategy 1 (June-July 2020):
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Entered fictitious trades into Macquarie Bank's risk management system (MTS), which appeared as "breaks" in End of Day (EOD) futures reconciliation.
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Left trades open for several days before cancellation.
Strategy 2 (July 2020-February 2022):
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Entered fictitious trades with future clearing dates to avoid EOD reconciliation detection.
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Continuously amended clearing dates to maintain concealment (continuously rolled forward clearing dates to stay ahead of reconciliation processes).
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Learned of the $50,000 investigation threshold for backdated trades (i.e., trades less than $50,000 did not generate any alerting) and created offsetting fictitious trades to keep variances below this threshold.
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Generated significant numbers of Cancellations, Amendments, and Backdates (CABs).
Concealment Strategies
The trader was able to conceal their activity by:
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Building relationships with junior Product Control Team members to minimize scrutiny.
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Pre-empted challenges by providing superficial explanations.
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Requested "holdouts" or adjustments to P&L while making amendments.
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Arranged for "clean" emails to be sent to wider distribution lists to appear legitimate.
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Falsified 46 out of 73 broker volatility curve quotes (63%).
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Manually removed months of data before forwarding them to the Independent Valuation Team.
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Altered figures to make positions appear more profitable.
Circumventing Controls
These concealment strategies meant the trader was able to circumvent three key controls:
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Product Control Team's daily P&L reporting process (final losses when unwound: $57.8 million).
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End of Day futures reconciliation process.
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CABs reporting and monitoring system (generated 9,269 CABs out of 13,311 total CABs for the entire Bulks Desk (70% of all CABs)).
Macquarie Bank Fines and Penalties
The enforcement action resulted in two distinct penalties:
Macquarie Bank Limited - London Branch:
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FCA Fine: £13,031,400 (after 30% early settlement discount)
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Original penalty calculation: £18,616,400
Individual Trader:
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Prohibition Order from performing any regulated activity
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Would have faced a £72,600 fine (after 30% discount) if not for financial hardship
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Original penalty calculation: £103,700
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