At its meeting on 29 October 2008, the Board of Directors of Oslo Børs resolved to issue an official criticism of SEB Enskilda AS for breach of the exchange's trading rules in connection with its action in registering certain orders for a customer.
The criticism relates to a breach of Section 4.6.1 of the NOREX Member Rules, cf. Sections 4.9 and 4.10, which stipulates that orders placed in the exchange's trading system must reflect the current market value, cf. Section 31 of the Stock Exchange Act and Section 33 of the Stock Exchange Regulations.
Brief description of the case
On 5 May 2008, SEB Enskilda placed orders in the trading system for the Aker Yards share that led to 69,900 shares in the company being purchased in the space of approximately 4 minutes. As a result of these orders, the company's market capitalisation increased by over 20%, equivalent to around NOK 1.6 billion.
The orders originated from an algorithm-based machine at one of SEB Enskilda’s customers. It is understood that the machine misinterpreted the trading picture on the basis of three off-exchange trades that were marked with the trading type derivative-related. These trades to not form part of the official pricing of the share, or of the indices in which the share is included.
The Oslo Børs Trading Rules stipulate that orders placed in the exchange's trading system must reflect the current market value. ’Current market value’ means prices which, upon a comprehensive assessment, reflect the current pricing of the instrument in question.
These erroneous trades caused major disturbance to stock exchange trading, not only in the Aker Yards share, but also in indices and index-related instruments. As a stock exchange member firm, SEB Enskilda is responsible for ensuring that orders which breach the rules are not entered into the trading system, and this applies equally to orders generated electronically. The reason that the Board did not impose a violation charge in this case is that it is the first time that a breach caused by electronic order generation has triggered a disciplinary action by Oslo Børs.
The minutes of the Board meeting, including the detailed consideration of this case, will in appr. one week be available on the Oslo Børs website at: http://www.oslobors.no/ob/vedtak
