QUICK FACTS
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Macquarie Fine Amount: $4,995,000 million (AUD)
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Date: 25 September 2024
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Violation Period: January - September 2022
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Primary Violation: Marking the Close
Macquarie ASIC Fine Overview
Following an ASIC investigation, the Markets Disciplinary Panel (MDP) has imposed a financial penalty on Macquarie Bank Limited for failing to prevent suspicious orders in the electricity futures market. As the largest participant in energy derivatives (controlling approximately 58% of electricity futures orders), Macquarie allowed three clients to place orders that potentially manipulated daily settlement prices over a nine-month period in 2022.
Details of the Macquarie Fine
Surveillance System Failure
Macquarie's primary trade surveillance tool (Nasdaq SMARTS) contained a coding error that prevented it from triggering alerts for suspicious trading activity. The market close time for electricity futures was incorrectly hardcoded as 16:30 instead of 16:00, meaning suspicious end-of-day trading activity went undetected.
Pattern of Suspicious Trading
Macquarie's suspicious activity followed a consistent pattern:
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Orders were placed within the last minute of market close
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Trading impacted the daily settlement price
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Price movements favored the clients' existing positions
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Impact on daily settlement prices ranged from 0.3% to 26.7%
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Individual client positions benefited between $10,762 and $4,274,688 per day
Specific Instances of Market Abuse
Client One (via Third Party Broker) - 12 January 2022:
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Placed order 14 seconds before market close
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Sold at $47, $1.85 lower than last traded price
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Impacted Daily Settlement Price by -3.09%
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Client benefited by: $405,000
Client Two - 27 June 2022:
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Placed two orders three and four seconds before close
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First order: Sold at $305, $16 lower than last traded price
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Second order: Sold at $245, $10 lower than last traded price
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Combined impact on daily settlement prices ranged from -2.49% to -3.54%
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Client benefited by: $4,274,688
Client Three - 8 September 2022:
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Placed four orders 13 seconds before close, all with significant price increases:
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PNH5: $5.28 higher than last traded (+2.95%)
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PNM5: $18.40 higher than last traded (+11.68%)
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PNU5: $20.86 higher than last traded (+11.33%)
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PNZ5: $19.81 higher than last traded (+10.81%)
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Client benefited by: $122,237
Timeline
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January-February 2022: First client placed initial suspicious orders
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February 2022: ASIC first alerted Macquarie about suspicious trading
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May-June 2022: Second wave of suspicious orders from first client
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June 2022: Second client began placing suspicious orders
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September 2022: Third client placed 21 suspicious orders
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October 2022: Macquarie finally implemented an interim surveillance measure
Macquarie Asic Fines and Penalties
The MDP structured the $4,995,000 million penalty across three periods of misconduct:
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First Period (Jan-Feb 2022): $666,000
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Second Period (May-June 2022): $1,887,000
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Third Period (Sept 2022): $2,442,000
Sources:
