High-frequency traders in the clear
The Australian Securities and Investments Commission released an update on Tuesday of its inquiry into a series of unusual transactions on the ASX on October 18.
Shares in more than eight blue-chip stocks - including ANZ, Commonwealth Bank, Brambles, AGL, Bank of Queensland, Ansell and Aristocrat - saw huge spikes in their share prices in the seconds after trading began at 10am.
The series of transactions raised the spectre of market manipulation - and called the integrity of trading on the ASX into question - after a trade worth $200 million was revised down to just $56 million in the seconds before the market opened.
ASIC did not rule out market manipulation, saying only that high-speed traders were not involved.
"ASIC has ruled out a dysfunctional algorithm or high-frequency trading strategies as the cause of the spike," its update said. "ASIC has spoken with the market participant and the ASX, to obtain information regarding the cause of the trading spike. Interviews were conducted the day after the incident with the parties involved in the transactions, including the client."
It found that all questionable orders were placed through the same broker - believed to be UBS on behalf of an overseas client, but neither is named by ASIC.
A spokeswoman for UBS said yesterday the company would "not be making any comment at this stage".
ASIC said its inquiry had found that large-volume orders to sell securities in the opening auction on the ASX were placed through a single broker. But immediately before the beginning of the daily opening auction there was a reduction in the volumes of those sell orders for securities trading in the A-B rotation of the auction (in companies with names beginning with letters A and B).
"This late reduction in volumes caused several securities to trade in the auction at significantly higher prices relative to the previous day's close," the update said. The larger order inflated the ASX opening price and the value of exchange-traded funds based on the ASX 200 Index, listed as XJO.
The ASX 200 Futures Index reached 4606 on October 18, pushing it above the 4600 level for the first time since the global financial crisis.
The $144 million change caught the market napping, and large fluctuations hit some share prices.
The mystery trades in ANZ pushed the share price up $1.67, or 6.5 per cent, when trading began at 10am. The stock soared to $27.63 per share on the opening bell, before falling to $25.79 when the market closed. Inquiries are continuing.
Frequently Asked Questions about this Article…
On October 18 a series of unusual transactions caused share prices in more than eight blue‑chip stocks to jump in the seconds after the 10:00am opening. A large trade was revised from about $200 million down to $56 million just before the market opened, and a roughly $144 million change surprised the market. The spike affected opening prices, exchange‑traded funds linked to the ASX 200, and short‑term price volatility that everyday investors may have noticed in their portfolios.
The article names several blue‑chip stocks that saw big opening spikes, including ANZ, Commonwealth Bank, Brambles, AGL, Bank of Queensland, Ansell and Aristocrat. The unusual trading also affected ETFs based on the ASX 200 index (listed as XJO).
No. The Australian Securities and Investments Commission (ASIC) said it has ruled out a dysfunctional algorithm or high‑frequency trading strategies as the cause of the spike after interviewing the market participant, the ASX and parties involved in the trades.
Not entirely. ASIC did not rule out market manipulation — it simply found that high‑speed traders and a broken algorithm were not the cause. ASIC's inquiry is ongoing and inquiries are continuing.
ASIC found that large‑volume sell orders for the opening auction were placed through a single broker. Immediately before the opening auction the volumes of those sell orders were reduced for securities in the A‑B rotation, which caused several stocks to trade at significantly higher prices relative to the previous day's close and inflated the ASX opening price.
ASIC did not name the broker, but the article says the questionable orders were believed to have been placed through UBS on behalf of an overseas client. A UBS spokeswoman said the company would not be making any comment at this stage.
The ASX 200 Futures Index reached 4,606 on October 18, pushing it above the 4,600 level for the first time since the global financial crisis. The larger order activity and subsequent volume reductions inflated the opening price and therefore the value of ETFs based on the ASX 200 index (XJO).
Mystery trades pushed ANZ's share price up $1.67, or about 6.5%, when trading began at 10am — the stock briefly climbed to $27.63 at the opening bell before falling back to $25.79 at the close that day.
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