Macquarie Bank has been fined a record $4.995 million by the Markets Disciplinary Panel (MDP) for failing to prevent suspicious trading orders on the electricity futures market, ASIC reported.
The penalty, the largest ever issued by the MDP, was imposed after an ASIC investigation revealed that Macquarie allowed 50 suspicious orders from three clients between January and September 2022.
The orders were placed in the final minute of trading and were suspected of being intended to manipulate the daily settlement price in favor of the clients’ existing positions. The MDP found that Macquarie should have suspected these trades were creating a false or misleading market appearance.
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“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,” ASIC chair Joe Longo (pictured above) said.
Despite repeated warnings from ASIC, Macquarie did not address gaps in its surveillance, allowing further suspicious trades to occur.
The manipulation of energy markets can significantly impact funding costs for suppliers, which may translate to higher energy prices for consumers.
The MDP criticised Macquarie’s lack of urgency in addressing its market gatekeeping responsibilities, particularly during a period of high market volatility due to global events, including the war in Ukraine.
The MDP noted that Macquarie’s inadequate response to ASIC’s concerns during a time of unprecedented market volatility was a key factor in determining the penalty.
The bank failed to fully recognise its responsibilities as a market participant, showing a lack of ownership over its role in preventing suspicious trades, it was said.
The MDP also highlighted concerns about Macquarie’s internal culture and reporting processes, suggesting systemic issues within the bank’s operations.
The findings underscored Macquarie’s accountability for its staff’s actions and the need for better escalation and oversight mechanisms.
Energy market volatility
The breaches occurred during a period of extreme volatility in energy markets, which created incentives for market manipulation in futures contracts.
Manipulating closing prices can benefit one party while negatively impacting others, leading to financial pressures on energy suppliers and ultimately affecting consumers.
Macquarie’s fine is part of a broader regulatory crackdown on market misconduct in energy and commodity derivatives.
Other recent actions include penalties against J.P. Morgan Securities and ongoing legal proceedings against COFCO International for alleged market manipulation.
Macquarie did not contest the breaches and has paid the fine.
While compliance with the infringement notice does not constitute an admission of guilt, the penalty serves as a stark reminder of the importance of robust market surveillance and compliance, said ASIC, which recently expanded reference protocols to mortgage aggregators as well as reported findings of high fees charged to low-income customers by major banks.
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