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Following an investigation by the Australian Securities and Investments Commission (ASIC), the Markets Disciplinary Panel (MDP) has imposed a record fine of $5.00 million on Macquarie Bank Limited for failing to prevent suspicious orders in the electricity futures market. This penalty marks the highest ever levied by the MDP.
Between January and September 2022, Macquarie breached market integrity rules on 50 occasions, allowing three of its clients to place orders that displayed characteristics indicative of an intention to ‘mark the close’. These orders were submitted within the last minute of market close, thereby influencing the daily settlement price in a direction favourable to the clients’ existing interests.
The MDP concluded that Macquarie should have suspected each of these 50 orders was submitted with the intention of creating a false or misleading appearance in the market.
ASIC chair Joe Longo said: “The record penalty imposed by the MDP reflects the serious, prolonged and potential systemic failures by Macquarie to detect and prevent suspected manipulation in the ASX 24 market for energy derivatives. Macquarie is the largest market participant in energy derivatives and given its role as a gatekeeper, it must ensure suspicious orders are not permitted to be placed on our markets.
“We put Macquarie on notice about suspicious orders placed by its clients on numerous occasions and it repeatedly failed to take timely action to address the conduct of its clients and the gap in its surveillance capability. As a consequence, it permitted further suspicious orders to be placed on the market.
“The consequences of manipulating energy markets can have a detrimental flow-on impact to supplier funding costs, and in turn energy prices. This can lead to higher energy bills for consumers who are already struggling with the cost of living.”
The conduct in question occurred during a period of unprecedented volatility in global energy markets due to supply issues and the ongoing conflict between Russia and Ukraine. ASIC contacted Macquarie on six separate occasions to raise concerns about volatility in energy markets or suspicious trading activities involving its clients.
The MDP identified Macquarie’s failure to respond to ASIC’s concerns, particularly during a time of heightened need to monitor the electricity futures market, as an aggravating factor in determining the penalty’s size.
Moreover, the MDP found that Macquarie had not fully grasped the seriousness of its obligations as a market participant to act promptly on the obvious risks associated with deficiencies in its surveillance system. The panel said that Macquarie had not, at the time, taken full ownership or responsibility for its conduct.
The MDP also remarked that Macquarie is accountable for the actions of its staff and, if matters were not escalated when they should have been, it may suggest more systemic issues regarding the culture and reporting within the bank.
In a statement given to Broker Daily, a spokesperson from Macquarie said that the bank acknowledges the infringement notice issued by the MDP.
The statement said: “Macquarie takes full responsibility for all aspects, particularly given its important role as gatekeeper and the largest market participant facilitating clients’ activity in electricity futures in Australia and New Zealand.
“There are learnings from this matter and Macquarie takes ASIC’s action very seriously. Macquarie has implemented remediation actions to ensure that issues with monitoring for suspicious orders are escalated and actioned appropriately and is continuing to work on areas for further improvement.”
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