ASIC Fines High Frequency Broker

For initiating a suspicious trade in 2010, a high-frequency broker has been fined by the Australian Securities and Investments Commission (ASIC) this week.

The trader remains unnamed, as the regulator said it will divulge the identity of the individual. It’s also not clear if the trader will receive disciplinary action aside from the fine.

The trader is ordered to pay up to $130,000 by the commission.

As a client of Instinet Australia, the commission also deemed it important to fine the company for allowing the trader to issue “wash trades”, a method by which brokers or traders manipulate stocks where buying and selling is simultaneously done so that it could artificially affect the volume of trading and its prices.

Instinet Australia, according to the ASIC, is liable not only for not stopping these trades, but also for failing to alert the authorities about it. The company was apparently aware that it didn’t have the proper filter in place for its processing system, hence high-speed traders could by-pass this.

The ASIC also found that the computer alerts on trading were not acted upon by the company. Therefore, the disciplinary tribunal said Instinet’s actions were “careless and irresponsible” and that it was unacceptable.

“‘In all the circumstances of the matter, Instinet’s misconduct … was careless and irresponsible in the context of its regulatory obligations. Instinet’s misconduct constituted an unacceptable serious lack of judgment and proper reasonable regard to its mandatory obligation to have in place an appropriate filter.”

The suspicious trades happened for as long as three months.