ASIC charges Goldman Sachs Australia Pty Ltd with $35,000 penalty 

The Australian Securities and Investments Commisions (ASIC) has charged Goldman Sachs Australia Pty Ltd (Goldman Sachs) with a penalty of $35,000 to comply with an infringement notice given to it by the Markets Disciplinary Panel (MDP). The penalty was for failing to prevent the entry into the ASX Trading Platform of an erroneous Order which resulted in a market for AP Eagers Limited ordinary shares not being both fair and orderly.

The MDP was satisfied that on 17 May 2012, a client of Goldman Sachs (Client), instructed Goldman Sachs to buy 2,800 AP Eagers Limited fully paid ordinary shares having ASX code ‘APE’ at ‘Best Carefully’ (Initial Order).
The Initial Order was to be manually worked by a Designated Trading Representative (DTR) at Goldman Sachs (Goldman Sachs DTR). The Goldman Sachs DTR was to also work a number of other unrelated Orders, including an ‘at-market’ Order to buy National Australia Bank Limited fully paid ordinary shares having ASX code ‘NAB’.

As the Market was nearing the open for the day, the Goldman Sachs DTR intended to key-in the Initial Order through Goldman Sachs’ manual trading system (Trading System) before its submission into the ASX Trading Platform. However, at 9:52:44 during the Pre-Open Session State, the Goldman Sachs DTR instead keyed-in an Order to buy 2,800 APE at $29.13 and submitted this into the ASX Trading Platform (Relevant Order) – by mistakenly thinking the ASX code had been keyed-in as NAB when in fact it was APE.

The market in APE immediately before the entry of the Relevant Order into the ASX Trading Platform was $14.85/$15.00/$14.85 (bid/ask/last traded price).
After the Relevant Order was keyed-in through the Trading System and before its submission into the ASX Trading Platform, the Goldman Sachs DTR received and acknowledged Trading System soft filter alerts or warnings for ‘price deviation’.

On Market open, after commencement of the Open Session State and opening auction, at 9:59:59 the Relevant Order matched and executed in full, resulting in four Market Transactions totalling 2,800 APE at $29.00 (Relevant Transactions).
The submission into the ASX Trading Platform of the Relevant Order, resulting in the Relevant Transactions, caused the price of APE to increase from $14.85 to $29.00, representing an increase of $14.15 or 95%.
At 10:08:00, following an initial telephone call, the Goldman Sachs DTR contacted ASX by email and requested cancellation of the Relevant Transactions. The Relevant Transactions were subsequently cancelled by ASX direction.

By reason of Goldman Sachs’ entry of the Relevant Order into the ASX Trading Platform on 17 May 2012, the MDP had reasonable grounds to believe that Goldman Sachs contravened Rule 5.9.1 of the ASIC Market Integrity Rules (ASX Market) 2010 (MIR 5.9.1), and thereby contravened subsection 798H(1) of the Corporations Act 2001 (Corporations Act) which requires compliance with the market integrity rules. The MDP issued Goldman Sachs with an infringement notice specifying a penalty of $35,000.

 

Source: ASIC

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