Merrill Lynch Equities (Australia) has paid a penalty of $120,000 to comply with an infringement notice given to it by the Markets Disciplinary Panel (MDP).
The penalty was for not ensuring that Merrill Lynch had in place:
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– organisational and technical resources for its system for the automated processing of orders, including appropriate automated filters; and
– processes to record any changes to the filters to enable automated orders to be submitted into the ASX’s trading facility, without interfering with the efficiency and integrity of ASX’s market or the proper functioning of that facility.
On 24 May 2011, Merrill Lynch Global Wealth & Investment Management entered an order through Merrill Lynch’s system to sell 50 million ordinary shares in Future Corporation Australia, on a deferred settlement basis. At the time Merrill Lynch was not aware of a 1:10 reconstruction of the shares and as a result entered the order at $0.002 instead of $0.02.
The order was automatically routed to the ASX trading platform despite it being 13 price steps and 86.7% lower than the highest bid in the market. The order resulted in 13 transactions at prices from $0.015 to $0.002, resulting in an 86.7% decrease in the price of FUTDA. Eleven of the transactions were subsequently cancelled.
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By GlobalDataIn March 2009, unknown to Merrill Lynch, changes were made to its systems which enabled certain orders manually entered by GWIM, to be automatically routed to the ASX without being reviewed by Merrill Lynch’s trading desk, or being subject to any price tolerance or price step filters or other checks.
Merrill Lynch has taken further remedial action to prevent a recurrence of this incident. Merrill Lynch co-operated with ASIC throughout its investigation and did not dispute any material facts
