Credit Suisse warned as trading system fails again
The trade was placed for a client on November 7, 2011, at an incorrect price - altering the market's official open and low prices for that day.
The Australian Securities and Investments Commission's disciplinary panel said it was the second time the group had been fined over failures with its automated trading system. The company has separately been sanctioned by the stock exchange' disciplinary tribunal on six other occasions since 2003 - on two because of automated trades.
The regulator said Credit Suisse had shown negligence over the misconduct, which had the potential to harm the reputation and integrity of the market.
"Credit Suisse did not self-report the breaches to ASIC and failed to inform both ASIC and the ASX in a timely manner," it said.
"Any future, repeat contraventions in similar or comparable matters will not be viewed favourably."
According to the Corporations Act, companies must have the technical resources in place to prevent any interference with the market. This includes ensuring their automated systems, which use algorithms to generate trades, correctly pick up changes to share prices.
Credit Suisse's false trade related to the sale of 2.9 million shares in failed global construction and engineering company Hastie Group. Credit Suisse's system failed to pick up changes to its share price earlier in the day when Hastie undertook a 10-to-1 consolidation of its shares.
As a result, the false order was placed at 47¢ lower than it should have been, at 51¢ - a 48 per cent difference.
ASIC noted that Credit Suisse had agreed not to contest the matter or dispute any material facts.
A Credit Suisse representative said: "Credit Suisse responded promptly to this incident and has put in place necessary processes to help prevent a reoccurrence."
Frequently Asked Questions about this Article…
ASIC fined Credit Suisse's equities arm $95,000 after its automated trading system failed to detect a false order placed on 7 November 2011. The incorrect trade altered the market's official open and low prices for the day.
The incident involved Credit Suisse and shares in the failed construction company Hastie Group. The Australian Securities and Investments Commission (ASIC) and the Australian Securities Exchange (ASX) were the regulatory and exchange bodies referenced in the matter.
Credit Suisse's system failed to register a 10-to-1 share consolidation by Hastie Group earlier that day. As a result, a sale of 2.9 million Hastie shares generated a false order that was placed at 51¢—47¢ lower than it should have been, a 48% difference.
ASIC said Credit Suisse showed negligence because the misconduct had the potential to harm the reputation and integrity of the market. ASIC also noted Credit Suisse did not self-report the breaches and failed to inform ASIC and the ASX in a timely manner.
ASIC imposed a $95,000 fine in this case. ASIC's disciplinary panel said this was the second time Credit Suisse had been fined over failures with its automated trading system. Separately, the ASX disciplinary tribunal has sanctioned the group on six other occasions since 2003, including two sanctions related to automated trades.
Under the Corporations Act, companies must have the technical resources to prevent interference with the market. This includes ensuring automated systems and algorithms correctly pick up changes to share prices, such as corporate actions or consolidations.
Credit Suisse agreed not to contest the matter or dispute any material facts, and a company representative said the firm responded promptly and had implemented necessary processes to help prevent a reoccurrence.
Automated trading errors can temporarily distort official market prices (for example, the market open and low). Regulators like ASIC can fine firms and require improvements because such failures can harm market reputation and integrity. Corporate actions (like share consolidations) are examples of events that automated systems must correctly handle.
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