.jpg)
The Disciplinary Committee of NASDAQ OMX Stockholm AB (“the Exchange”) has found that Morgan Stanley International Plc (”MSIP”) has contravened the Exchange’s Nordic Member Rules (“NMR”) and has therefore ordered them to pay a fine of four hundred thousand Swedish kronor (SEK 400,000).
The case pertains to an incident on November 30, 2011, immediately after market open, when MSIP rapidly submitted a large number of orders and executed a very large number of trades in a group of Stockholm listed shares. The affected order books incurred unusual volatility and during the period one intraday auction was triggered by one of the Exchange’s automatic volatility guards.
The trading pattern was immediately observed by the Exchange and it stood clear that an incident had occurred. When the Exchange attempted to contact the MSIP trader responsible for submitting the orders it was unable to do so. For these reasons the Committee held that MSIP has violated the NMR, which states that a member enabling client driven trading, so called Direct Market Access (DMA), shall use a trader ID that is designated for DMA and it shall appoint contact persons responsible for such ID and ensure that he or she can be contacted at any time during trading hours.
The trading behavior was a result of a MSIP client (the “client”) driven DMA trading. The client had made a coding error in its algorithm software that resulted in the unintentional trading activity. As part of that activity a great number of orders were submitted where the buyer and seller in the trades that followed was the same legal person. Such orders and trades cannot be considered as genuine. Hence MSIP violated the NMR where it is stated that all orders must constitute genuine orders and trades.
Moreover, whilst the Exchange acknowledges that MSIP's internal systems and controls enabled them to detect and independently terminate the trading, the incident itself shows that MSIP had not technical and administrative arrangements in order to hinder it from happening and causing market disturbance. MSIP has therefore violated the NMR also in this regard.
Accordingly, the Disciplinary Committee orders MSIP to pay a fine of four hundred thousand kronor (SEK 400,000).
The Disciplinary Committee’s ruling has been published on:
http://nasdaqomx.com/listingcenter/nordicmarket/surveillance/stockholm/disciplinarycommittee
