An Australian Securities and Investment Commission (ASIC) investigation has led to a whopping fine for investment banker JP Morgan for permitting suspicious trading on the Australian Stock Exchange wheat futures market.
In light of the ASIC investigation the Markets Disciplinary Panel (MDP) has fined JP Morgan Securities Australia Limited $775,000 for permitting suspicious client orders to be placed on the futures market.
An ASIC release said the MDP found JP Morgan officials should have suspected 36 orders placed by a client 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) contract.
ASIC deputy chair Sarah Court said the fines sent out a message to potential offenders.
"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," Ms Court said.
She said the attempted manipulation could have a flow on right through the supply chain to a retail level.
'Farmers use these contracts to manage wheat price fluctuations which can affect what Australians pay at the checkout," 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,' Ms Court said.
In terms of the technicalities of the infringements the MDP said that, individually and as part of a series, the orders exhibited characteristics of an intention by the client to manipulate the market by 'marking the close', which is the process of placing orders or trading close to the end of a trading session to influence the daily settlement price of a derivative contract.
In this case, the sell orders placed by JP Morgan's client could possibly have resulted in a decrease to the daily settlement price of the wheat contract.
The MDP found that JP Morgan's failure to identify its client's trading as suspicious was 'careless' and that the company should have detected the conduct, and should have acted more expeditiously when alerted to it by ASIC.