Macquarie Securities cops ASIC penalty

Macquarie's securities business has paid a $300,000 penalty for contravening market integrity rules, the corporate regulator said this morning.

ASIC issued an infringement notice to Macquarie Securities on May 3, after its markets disciplinary panel determined it had reasonable grounds to believe Macquarie contravened the rules that deal with providing data to ASX and Chi-X.

ASIC said Macquarie transmitted roughly 42 million orders to the two exchanges with incorrect or missing required regulatory data over a four year period to July, 2018. Macquarie also submitted roughly 377,000 trade reports to the two exchanges with same shortcomings, ASIC said.

This incorrect or missing information included: capacity (if Macquarie was acting as a principal or agent), origin (a notation to identify the person on whose instructions Macquarie was acting) and intermediary (AFSL number of an intermediary using Macquarie's automated order processing system).

"The MDP emphasised that the provision of accurate regulatory data enhances market transparency and ensures an orderly market. The provision of incorrect or missing regulatory data to market operators impedes informed regulatory decision-making by market operators and by ASIC," the regulator said.

The panel attributed the breaches to weaknesses in Macquarie's systems, processes for on-boarding new clients and its control framework.

It added that Macquarie intended to comply with the market integrity rules and reported the issues to ASIC and was quick to implement remedial measures after identifying the causes following a comprehensive review.

The compliance with the infringement notice is not an admission of guilt or liability, and Macquarie is not taken to have contravened subsection 798H(1) of the Corporations Act, ASIC said.

"The MDP considers Macquarie's conduct to be negligent, having regard to Macquarie's poor design and implementation of updates to key systems, the high number of orders and trade reports containing incorrect or missing data, the multiple categories of incorrect or missing data and the length of time the problems persisted without detection by Macquarie," it said.

It said that given Macquarie's scale, market share and high market flows, the MDP considers market participants such as Macquarie to have greater potential and capacity to undermine market integrity.

"A market participant such as this should carry a greater responsibility to properly manage the risks that flow from their conduct. If that risk is poorly managed, the financial consequences to the market participant should be commensurately greater," it said.

Macquarie said in its response there was no negative impact to clients.

"In 2018 Macquarie identified and self-reported to ASIC a recurring designation error in relation to three regulatory reporting data fields with respect to certain client electronic trading accounts.  There was no negative impact to clients. Macquarie wrote to all clients at the time advising them of the errors," Macquarie said in a statement.

"Macquarie accepts the penalty and has since undertaken a comprehensive review of all regulatory data in its systems, corrected the data errors and implemented changes to ensure that similar errors do not occur again."

The markets disciplinary panel's last decision from November saw UBS Securities cop a $120,000 fine an infringement notice for transactions in relation to six on-market buy-backs conducted by UBS on the ASX 2017.

The movements "were not in the ordinary course of trading and were not in accordance with the clients' instructions," ASIC said at the time.

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