J.P. Morgan hit with $775k penalty

J.P. Morgan Securities Australia Limited (JPMSAL) has been hit with a $775,000 fine by the Markets Disciplinary Panel (MDP) following an investigation by the Australian Securities and Investments Commission (ASIC).

The MDP found JPMSAL permitted suspicious client orders to be placed on the futures market, ASX 24.

The MDP said it should have suspected the 36 orders (placed between 11 January 2022 and 3 March 2022) were submitted with the intention of creating a false or misleading appearance with respect to the market for, or the price of, the Eastern Australia Wheat futures January 2023 (WMF3) contracts.

"There are real world consequences for this sort of behaviour which is why tackling manipulation in energy and commodities derivatives markets has been an ASIC priority," ASIC deputy chair Sarah Court said.

"Farmers use these contracts to manage wheat price fluctuations which can affect what Australians pay at the checkout."

Court said market participants are the gatekeepers to Australia's markets, and they need to uphold the highest standards.

"They have a central role in detecting, preventing and disrupting suspicious trading activity, particularly in periods of volatility as was the case here," she said.

"The MDP's decision emphasises that market participants cannot solely rely on automated trade monitoring systems to detect potential misconduct and must take immediate action once alerted to misconduct by ASIC."

The MDP's Infringement Notice outlined that "this case highlighted the responsibility of all market users to pro-actively draw attention to potential rule breaches in order to maintain market integrity, and the importance of timely communication between regulators, market participants and clients to ensure that any potential misconduct is rectified immediately once detected".

The MDP's view was that, individually and as part of a series, the orders exhibited characteristics of an intention by the client to manipulate the market by placing orders or trading close to the end of a trading session to influence the daily settlement price of a derivate contract.

The MDP found that JPMSAL's failure to identify its client's trading as suspicious was "careless", that JPMSAL should have detected the conduct, and should have acted more expeditiously when alerted to it by ASIC.

JPMSAL has complied with the infringement notice and paid the fine, ASIC said.