DISCIPLINARY MATTERS

Transcription

1 N: 437/11 ASX Circular Date: 15 September 2011 Key tpics 1. Timber Hill (Australia) Pty Ltd DISCIPLINARY MATTERS The Appeal Tribunal dismissed an appeal by Timber Hill (Australia) Pty Limited ( Timber Hill ) f a determinatin by the Disciplinary Tribunal that had fund Timber Hill liable fr eight ASX Market Rule cntraventins. The Disciplinary Tribunal subsequently impsed a ttal penalty f $250,000 (plus GST) fr the fllwing Cntraventins: Cntraventin 1: Timber Hill cntravened ASX Market Rule n 5 March 2009 by entering an at market Order t purchase 2,000 SPDR S&P/ASX 200 Listed Prperty Fund ( SLF ), which resulted in a market fr SLF that was nt bth fair and rderly. Reading List Client Advisers Cmpliance Managers DTR Operatrs Managing Directrs Office Managers Operatins Managers (back ffice) Cntraventin 2: Timber Hill cntravened ASX Market Rule n 24 April 2009 by entering 24 at market Orders t sell Quickstep Hldings Limited ( QHL ), which resulted in a market fr QHL that was nt bth fair and rderly. Cntraventin 3: Timber Hill cntravened ASX Market Rule n 27 April 2009 by entering 20 Orders t purchase Billabng Internatinal Limited ( BBG ), which resulted in a market fr BBG that was nt bth fair and rderly. Cntraventin 4: Cntact Cigdem Kcak Telephne (02) ASX Limited ABN Exchange Centre 20 Bridge Street Sydney NSW 2000 PO Bx H224 Australia Square NSW 1215 Internet: N respnsibility is accepted fr any inaccuracies cntained in the matter published. Timber Hill cntravened ASX Market Rule n 27 April 2009 by entering an at market Order t purchase Mineral Resurces Limited ( MIN ), which resulted in a market fr MIN that was nt bth fair and rderly. ASX withdrew Cntraventin 5 Cntraventin 6: Timber Hill cntravened ASX Market Rule n 7 May 2009 by entering an at market Order t purchase Clive Peeters Limited ( CPR ), which resulted in a market fr CPR that was nt bth fair and rderly. ASX withdrew Cntraventin 7 Cntraventin 8: Timber Hill cntravened ASX Market Rule n 5 June 2009 by entering 19 Orders t purchase Emec Hldings Limited ( EHL ), which resulted in a market fr EHL that was nt bth fair and rderly. Timber Hill (Australia) Pty Ltd Page 1 f 7

2 Cntraventin 9: N: 437/11 Timber Hill cntravened ASX Market Rule n 9 June 2009 by entering 97 Orders t sell Emec Chess Depsitry Interests issued by Ceur D Alene Mines Crpratin ( CXC ), which resulted in a market fr CXC that was nt bth fair and rderly. Cntraventin 10: Timber Hill cntravened ASX Market Rule between 5 March 2009 and 9 June 2009, in that it failed at all times t have in place apprpriate autmated filters in relatin t its system fr Autmated Order Prcessing ( AOP ). See Attachment A fr full details f the cntraventins. In determining the penalty the Disciplinary Tribunal cnsidered, amng ther things, the fllwing factrs: a) Timber Hill had taken steps t imprve its AOP filters in an effrt t prevent a recurrence f future cntraventins; b) Timber Hill assisted and cperated with ASX thrughut the investigatin f the matter; c) Timber Hill s disciplinary histry; d) the miscnduct were repeat cntraventins; e) the miscnduct was nt an islated ccurrence and ccurred ver a three mnth perid; f) the miscnduct appeared t have been systemic; g) the miscnduct had at least the ptential t result in lss t ther parties; and h) the miscnduct threatened the integrity and efficiency f the market. Given the aggravating and mitigating circumstances in this matter, the Tribunal determined it was apprpriate t sanctin Timber Hill $210,000 (plus GST) fr the seven cntraventins f Market Rule and $40,000 (plus GST) fr the cntraventin f Market Rule The Tribunal cnsidered cntraventins f the ASX Market Rules that undermine the fairness and rderliness f the markets are serius and that its fine shuld reflect the seriusness f the miscnduct. The Tribunal determined that the cntraventins are Level 2 (Serius) Cntraventins, fr which the applicable penalty range is $20,000 $100,000 (plus GST). Althugh the rders referred t in Cntraventins 1, 2, 3, 4, 6, 8 and 9 were entered at the Best Bid/Best Offer at the time, the Tribunal cnsidered that while the current Best Bid/Best Offer is a way f identifying the spectrum f rders in the market fr a prduct at a particular time, market participants are respnsible fr cnsidering all market utcmes prir t entering rders, ensuring that any rder submitted t ASX des nt result in an unreasnable price variatin that may have the effect f nt maintaining a fair and rderly market. The Tribunal fund that Market Rule was cntravened n ne ccasin, and Market Rule was cntravened n seven distinct ccasins, at different times and in relatin t different securities, which resulted in the creatin n each ccasin f a disrderly market, and with it the ptential fr flw-n damage t the ASX, Market Participants and investrs generally. The Tribunal frmed the view that this sanctin serves as a deterrent t this and ther Market Participants frm engaging in similar miscnduct, and apprpriately serves the interests f ASX and Market Participants, and prmtes cnfidence in the integrity f the markets. On 1 August 2010, the supervisin f trading n Australia s dmestic licensed markets and the supervisin f trading participants transferred frm ASX t the Australian Securities and Investments Cmmissin. The cnduct that is the subject f these cntraventins ccurred prir t the transfer date. ASX will cntinue t manage, and bring befre the Tribunal, disciplinary matters fr ptential breaches f its perating rules ccurring befre the transfer date. As part f the transfer, a number f changes were made t the rules, including the replacement f the ASX Market Rules by the ASX Operating Rules. Ptential perating rule breaches which ccurred prir t 1 August 2010 will be dealt with in accrdance with the rules in place at the time f the alleged breach. Timber Hill (Australia) Pty Ltd Page 2 f 7

3 Attachment A N: 437/11 Cntraventin 1: At 10:01:23.05 n 5 March 2009, Timber Hill entered an at market Order t purchase 2,000 SLF ( SLF Order ), ntwithstanding that immediately prir t its entry, the Bid/Ask/Last fr SLF was $5.52/$7.62/$5.90. The entry f the SLF Order int the Trading Platfrm resulted in a market fr SLF nt being bth fair and rderly, which cntravened Market Rule , in that: the SLF Order traded immediately and in its entirety, resulting in Timber Hill purchasing 2,000 SLF at $7.62; the trade caused the price f SLF t increase $1.72, r 29%, frm $5.90 t $7.62; the next trade in SLF was at 10:36:40.69 in which 1,000 SLF traded at $5.90, returning t its previus level; the SLF Order gave rise t a market in SLF that varied significantly frm ther markets in SLF which existed a relatively shrt time befre and after it; the price increase caused by Timber Hill s entry f the SLF Order was incnsistent with the histry f and recent trading in SLF; and the price increase caused by Timber Hill s entry f the SLF Order was incnsistent with trading in SLF n 5 March Cntraventin 2: In a three secnd perid after 10:29:29.70 n 24 April 2009, Timber Hill entered 24 at market Orders t sell QHL ( QHL Orders ), ntwithstanding that immediately prir t their entry, the Bid/Ask/Last fr QHL was $0.23/$0.235/$0.23 and the Bid schedule cnsisted f rders fr 747,746 QHL at prices frm $0.23 t $0.14. The entry f the QHL Orders int the Trading Platfrm resulted in a market fr QHL nt being bth fair and rderly, which cntravened Market Rule , in that: Each Order t sell QHL entered by Timber Hill during the perid traded in its entirety resulting in Timber Hill entering int 58 Market Transactins, selling a ttal f 466,598 QHL at prices frm $0.23 dwn t $0.17; the 58 Market Transactins entered int by Timber Hill caused nine price decreases and a cmbined decrease in the price f QHL f $0.06 r 26% within the three secnd time perid; the vlume f QHL sld by Timber Hill during the perid equated t 33.6% f the verall vlume f QHL traded n 24 April 2009 and was greater than the average daily vlume fr the previus five days QHL traded (464,429); Timber Hill was the nly Participant that sld QHL during the three secnd time perid; the price f QHL began increasing within 30 secnds f the trading by Timber Hill and returned t a level near that which it was at prir t the trading by Timber Hill ($0.21) apprximately 30 minutes later; the QHL Orders gave rise t a market in QHL that varied significantly frm ther markets in QHL which existed a relatively shrt time befre and after it; the rapid and significant price decline in QHL caused by Timber Hill s entry f the QHL Orders was incnsistent with the histry f and recent trading in QHL. the rapid and significant price decline caused by Timber Hill s entry f the QHL Orders was incnsistent with trading in QHL n 24 April 2009 in that the lw price f $0.17 was 16% lwer than the average price paid fr QHL fr 24 April 2009 ($0.201); and there were n market annuncements n 24 April 2009 that wuld explain a 26% decrease in the price f QHL. Timber Hill (Australia) Pty Ltd Page 3 f 7

4 Cntraventin 3: N: 437/11 Between 10:02:29.39 and 10:02:30.46 n 27 April 2009, Timber Hill entered 20 Orders t purchase BBG ( BBG Order ). Immediately prir t the entry, the Bid/Ask/Last fr BBG was $9.28/$9.35/$9.35. The entry f the BBG Orders int the Trading Platfrm resulted in a market fr BBG nt being bth fair and rderly, which cntravened Market Rule , in that: immediately prir t the entry f the BBG Orders, the Bid/Ask/Last fr BBG was $9.28/$9.35/$9.35; ten f the BBG Orders traded immediately resulting in Timber Hill entering int 26 Market Transactins, purchasing a ttal f 10,372 BBG at prices frm $9.35 up t $10.60; the 26 Market Transactins entered int by Timber Hill caused eight (r 88.9%) f the nine price increases and a cmbined price increase f $1.25 r 13.4% within the tw secnd perid; between 10:02:31.09 and 10:02:32:71, the price f BBG increased a further $0.45 t $11.05 due t trading by ther brkers and traded at r arund that level fr the next 10 secnds; at 10:02:52.21, 22 secnds after the last BBG Order, the price f BBG began falling and between 10:03:50 and 10:03:58 traded in the range $9.41 t $9.53, prices near t the price at which BBG was trading prir t the Market Transactins caused by the entry f the BBG Orders; the BBG Orders gave rise t a market in BBG that varied significantly frm ther markets in BBG which existed a relatively shrt time befre and after it; trading resulting frm the BBG Orders was incnsistent with the histry f, and recent trading in, BBG; and there were n market annuncements n 27 April 2009 that wuld explain a 13.4% increase in the price f BBG. Cntraventin 4: At 10:04:30.95 n 27 April 2009, Timber Hill entered an at market Order t purchase 7,350 MIN ( MIN Order 1 ). Prir t MIN Order 1, the Bid/Ask/Last fr MIN was $3.55/$3.59/$3.55. MIN Order 1 traded immediately in its entirety, resulting in an increase in the price f MIN frm $3.55 t $3.99, a rise f 12.3%. Immediately afterwards, Timber Hill entered an Order t sell 7,350 at $1.72 ( MIN Order 2 ). Prir t the entry f MIN Order 2, the market fr MIN was $3.55/$3.99/$3.99. MIN Order 2 traded immediately in its entirely in five trades at prices frm $3.55 dwn t $3.43, resulting in a decrease in the price f MIN frm $3.99 t $3.43, a decline f 14%. The entry f Min Order 1 and MIN Order 2 (cllectively, the MIN Orders ) int the Trading Platfrm resulted in a market fr MIN nt being bth fair and rderly, which cntravened Market Rule , in that: the Market Transactins resulting frm the MIN Orders caused the price f MIN t increase by $0.44 (12.3%) and then fall by $0.56 (14%) within 2 secnds; the MIN Orders gave rise t a market in MIN that varied significantly frm ther markets in MIN which existed a relatively shrt time befre and after it; trading in MIN between 10:04:30.95 and 10:04:32.36 was incnsistent with the histry f, and recent trading in, MIN; and there had been n annuncements fr MIN since 21 April 2009 and therefre n annuncements which wuld explain an increase f 12.3% r a decrease f 14% in the price f MIN n 27 April Timber Hill (Australia) Pty Ltd Page 4 f 7

5 Cntraventin 5: ASX withdrew Cntraventin 5 N: 437/11 Cntraventin 6: At 10:06:07 n 7 May 2009, Timber Hill entered an at market Order t purchase 22,150 CPR ( CPR Order ). Prir t the entry f the Order, the Bid/Ask/Last was $0.19/$0.20/$0.20. The CPR Order traded immediately in its entirety in three Market Transactins, at prices ranging frm $0.20 t $0.29. The trades resulting frm the entry f the CPR Order int the Trading Platfrm resulted in a market fr CPR nt being bth fair and rderly, which cntravened Market Rule , in that: the trades resulting frm the CPR Order caused a cmbined price increase f $0.09 r 45%; the next trade fr CPR ccurred at 11:14:30.92 at a price f $0.21 which was near the price that CPR had traded immediately befre the entry f the CPR Order; the CPR Order gave rise t a market in CPR that varied significantly frm ther markets in CPR which existed a relatively shrt time befre and after it; trading in CPR at 10:06:07.00 was incnsistent with the histry f and recent trading in CPR; and there were n annuncements n 7 May 2009 that wuld explain a 45% increase in the price f CPR. Cntraventin 7: ASX withdrew Cntraventin 7 Cntraventin 8: Between 10:02:00.07 and 15:31:39.58 n 5 June 2009, 1,764,719 EHL traded at prices frm $0.46 t $0.50, at an average price f $0.47. Between 15:31:39.80 and 15:31:39.97 n 5 June 2009, Timber Hill entered 11 Orders t purchase EHL at prices frm $0.50 t $ As a result, between 15:31:39.80 and 15:31:40.25 ( the First EHL Perid ) n 5 June 2009, Timber Hill entered int 16 Market Transactins purchasing 38,778 EHL at prices frm $0.50 t $ Between 15:31:40.27 and 15:31:41.23 n 5 June 2009 the price f EHL increased frm $0.50 t $0.54 (8%) n trading by ther brkers. Between 15:31:41.88 and 15:32:02.46 ( the Secnd EHL Perid ), Timber Hill entered a further 19 Orders t purchase EHL at prices frm $0.55 t $0.70 ( the EHL Orders ). During the Secnd EHL Perid and as a result f the EHL Orders, Timber Hill entered int 12 Market Transactins, purchasing 47,192 EHL at prices frm $0.55 t $0.70. The entry f the EHL Orders int the Trading Platfrm resulted in a market fr EHL nt being bth fair and rderly, which cntravened Market Rule , in that: the 12 Market Transactins entered int by Timber Hill as a result f the EHL Orders caused fur price increases and a cmbined increase in the price f EHL f $0.16 r 29.6% within the 21 secnd time perid; Timber Hill was the nly Participant that purchased EHL during the 21 secnd time perid; the price f EHL began decreasing immediately after Timber Hill s last trade at 15:32:02.46 and at 15:35:20.88, apprximately three minutes later, EHL returned t a price ($0.54) which was near that at which it had traded prir t the trading arising frm the EHL Orders; Timber Hill (Australia) Pty Ltd Page 5 f 7

6 N: 437/11 the EHL Orders gave rise t a market in EHL that varied significantly frm ther markets in EHL which existed a relatively shrt time befre and after it; as a result f the entry f the EHL Orders and the resulting Market Transactins, trading during the Secnd EHL Perid n 5 June 2009 was incnsistent with the recent histry f and recent trading in EHL and with trading in EHL n 5 June 2009; and there were n market annuncements n 5 June 2009 that wuld explain a 29.6% increase in the price f EHL. Cntraventin 9: Between 10:02:18.10 and 11:03:56.14 n 9 June 2009, 16,988 CXC traded at prices frm $19.59 dwn t $18.55, at an average price f $ Between 11:04:05 and 11:05:01 ( the Relevant CXC Perid ), Timber Hill entered 97 Orders t sell CXC ( the CXC Orders ). As a result f the CXC Orders, Timber Hill entered int 44 f the 48 Market Transactins affected during the Relevant CXC Perid. The entry f the CXC Orders int the Trading Platfrm resulted in a market fr CXC nt being bth fair and rderly, which cntravened Market Rule , in that: During the Relevant CXC Perid: the price f CXC decreased frm $18.55 t $16.03, a decrease f $2.52, r 13.6%; Timber Hill sld a ttal vlume f 7,555 CXC, which represents 71.65% f the ttal vlume f CXC (11,082) sld during the perid; transactins resulting frm the CXC Orders were respnsible fr six r 75% f the eight decreases in the price f CXC during the perid; and price decreases caused by transactins resulting frm the CXC Orders were respnsible fr $2.17 r 86.1% f the verall decrease f $2.52 during the perid; and the CXC Orders gave rise t a market in CXC that varied significantly frm ther markets in CXC which existed a relatively shrt time befre and after it. As a result f the entry f the CXC Orders by Timber Hill and the resulting Market Transactins, trading during the Relevant CXC Perid n 9 June 2009 was incnsistent with the recent histry f and recent trading in CXC, and with trading in CXC n 9 June 2009, in that: the CXC Orders caused a rapid and significant price decrease in CXC; trading resulting frm the CXC Orders created a new recent lw price as CXC had nt traded belw $17.10 in the mnth prir t 9 June 2009; the intra-day price range fr CXC n 9 June 2009 was $3.56, the largest range fr at least the preceding six mnths; the price f CXC began increasing at 11:05:22.36, 34 secnds after Timber Hill s last trade at 11:04:48.90 and increased t $18.14 at 11:49:14.96; CXC subsequently traded at prices frm $17.77 t $18.49 up until 12:58:06.75 and reached $18.50 at 13:00:00.04, the price at which CXC was trading prir t Timber Hill s first sale; and there were n market annuncements n 9 June 2009 that explained a 13.6% decrease in the price f CXC. Timber Hill (Australia) Pty Ltd Page 6 f 7

7 Cntraventin 10: N: 437/11 Timber Hill cntravened Rule (a) between 5 March 2009 and 9 June 2009, in that it failed at all times t have in place apprpriate autmated filters in relatin t its system fr AOP. At all material times, Timber Hill s AOP system permitted Autmated Client Order Prcessing ( ACOP ) and therefre allwed the rders f its client t be transmitted directly t the Trading Platfrm. On 8 May 2008 and 8 Octber 2008, Timber Hill intrduced changes t the autmated filters f its ACOP system t cmply with Rule Despite these filter changes, it was alleged that the filters fr Timber Hill s ACOP system between 5 March 2009 and 9 June 2009 were nt apprpriate in that: rders entered thrugh its ACOP system resulted in Cntraventins 1 4, 6, and 8 9; ITS Price Deviatin Warnings, user liability alerts r ther alerts were nt trigged by the ACOP system in relatin t any f the Orders that are the subject f Cntraventins 1 4, 6, and 8 9; the ACOP filters that Timber Hill had in place did nt prevent the ruting f any f the Orders that are the subject f Cntraventins 1 4, 6, and 8 9 t the ASX Trading Platfrm; and by reasn f the ineffective filtering f Orders thrugh its ACOP system, n seven ccasins in a perid f three mnths, Timber Hill allwed the Orders t be entered nt the Trading Platfrm, which caused a market fr each f the relevant securities t be nt bth fair and rderly. Timber Hill (Australia) Pty Ltd Page 7 f 7