CGML violated Regulation 11.1.b, which requires that ‘each Participant…shall conduct itself in accordance with principles of fairness and honesty and operate on the basis of criteria of professionalism and diligence.’ CGML manifested lack of professionalism in not sufficiently considering how the trade would affect the MTS market. In addition, the trade was not executed with adequate professionalism and diligence. The software used, and its interaction not only with MTS but also with CGML’s internal systems, were not tested sufficiently.
CGML violated Regulation 11.1.c, which provides that ‘each Participant…shall not perform acts which could prejudice the smooth operation of the Market.’ Although in the WMC’s view there was no major disruption in the functioning of the market on the day of the trade, there were short-run detrimental effects on liquidity, and there was some subsequent disruption as a result of the trade. Furthermore, the general view as seen in the press was (and perhaps still is) that the disruption was considerable; attitudes to the MTS market were affected negatively; and there undoubtedly could have been serious prejudice to the smooth operation of the market, both short-term and long-term.
CGML violated Regulation 11.1.i, which requires that ‘each Participant…shall ensure that the personnel performing trading activities have…sufficient knowledge of the rules and operating procedures of the Market and the procedures for use of the technical instruments used for trading activities on the Market.’ CGML traders had no training that dealt with the MTS Regulations. In addition, CGML traders expected immediate confirmation of the trade and therefore evidently had inadequate knowledge of the interface between their in-house system and the MTS platform.
The possible sanctions for contravention of the MTS Regulations are set out in Section 30.1 of the Regulations. In the light of the violations of the MTS Regulations we find above, and taking into account the CGML submission in mitigation dated 30 September 2005, we impose the following sanction: that CGML be suspended from trading on MTS SpA for a period of one month, effective 1 November 2005.
Article 31.5 of the MTS Regulations provides that the WMC decision ‘shall establish if the said decision shall be published and in which forms…’. This decision shall be made available to the press and shall also be posted on the information pages of the Screen-Based Trading System.
