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Abstract:Interactive Brokers Australia faces a $832,500 penalty following concerns over suspicious trading activities. The Market Disciplinary Panel (MDP) highlighted the firm's negligence in identifying dubious trades, even after warnings from the Australian Securities and Investments Commission (ASIC).
Interactive Brokers Australia Pty Ltd, a major player in electronic trading, has shelled out a substantial penalty of $832,500, following an infringement notice issued by the Market Disciplinary Panel (MDP).
The crux of the issue lies in Interactive Brokers' oversight in spotting suspicious trading activities of a specific client. The MDP emphasized Interactive Brokers' negligence in not identifying these dubious trades, compounded by the company's reckless approach. Despite receiving warnings from the Australian Securities and Investments Commission (ASIC), the firm continued to enable more questionable trades.
It's paramount for market participants to actively curb suspicious trading, armed with robust controls and the necessary resources. These entities should be adept at detecting potential market malpractices swiftly and must address any red flags raised by regulatory bodies like ASIC promptly.
Delving into specifics, ASIC's apprehensions stem from certain Closing Single Price Auction (CSPA) orders. These orders were lodged by an Interactive Brokers' client on the ASX from 10 March to 5 November 2021. This particular client, known for trading in Orthocell Ltd. (OCC) shares, wasn't a novice but an industry insider.
Interactive Brokers, given the clients trading patterns, should have been on high alert. Indicators of suspicion included:
- Late entry or modification in the CSPA.
- Trivial volume and value of orders.
- Manipulation to keep the OCC's price at the day's peak.
- Discrepancies in the clients trading throughout the pertinent day.
Moreover, the MDP highlighted that Interactive Brokers turned a blind eye when the client seemed to artificially boost the closing price of OCC. This activity painted a distorted image concerning OCC's price.
Adding fuel to the fire, ASIC alerted Interactive Brokers on 14 October 2021 about the irregularities. Yet, the client's suspicious trading didn't halt. Alarmingly, the client's activities prompted 44 ‘marking the close’ notifications on Interactive Brokers surveillance system between 10 February and 13 October 2021.
MDP criticized Interactive Brokers' lackadaisical response:
- Delays in addressing alerts.
- Insufficient documentation during alert assessments.
- Inaction regarding the client's trading behavior.
- Only reporting suspicious activities to ASIC on 5 November 2021.
It became evident that Interactive Brokers either lacked qualified personnel to handle such alerts or failed to provide appropriate supervision. The MDP underscored that high-risk alerts require immediate attention and comprehensive reviews within two weeks.
Interactive Brokers' inability to uphold the necessary 'organizational and technical resources' was not just an oversight but negligence, threatening the market's efficiency and integrity.
However, it's pivotal to note that settling the infringement doesn't equate to Interactive Brokers admitting any wrongdoing. The firm is not deemed to have breached any sections of the Corporations Act.
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The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
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