Pressure builds on ASX to reverse hoax trades
TRADERS who lost money in this week's $314 million market manipulation should have their money returned, according to the corporate law expert who previously served as the stock exchange's manager of legal services.
The comments by Tony de Govrik, who spent eight years at the Australian Securities Exchange until 1993, came as investigations continue into the hoax press release that rocked Whitehaven Coal shares on Monday.
Mr de Govrik is now the legal affairs director for the Australian Corporate Lawyers Association.
He said his former employer should soften its refusal to reverse the trades made during Monday's period of confusion.
"In fairness to the people who were trading on something that was clearly an orchestrated hoax and who have been disadvantaged, the ASX ought to consider reversing those trades," he said.
"You've got to ask the question - when it's now clear that people traded on an uninformed market - why the ASX wouldn't assist the people who have been disadvantaged by reversing the trades."
Whitehaven shares fell by nearly 9 per cent around midday on Monday after environmental activist Jonathan Moylan fooled some traders and media into thinking the company had been stripped of a $1.2 billion loan promised by ANZ Bank.
The ASX has stood firm this week behind its "trade cancellation rules", which state that a stock price must move by 10 per cent or more within three minutes to warrant a cancellation of trades made under illegitimate circumstances.
An ASX spokeswoman confirmed the Whitehaven incident did not meet the criteria.
"All trading in Whitehaven on Monday 7 January was conducted within ASX's prescribed no-cancellation range," she said.
"Subsequently, ASX has received no requests for cancellation from ASX market participants."
Despite the lack of formal requests, market participants have said privately that trades made during the hoax should be cancelled.
"Here we have an open-and-shut case of a hoax that has adversely impacted a significant listed company ... if there was ever a case of an ill-informed market in operation, then this is it," said one Melbourne broker who did not wish to be identified. "If we're not going to even consider reversing trades after the Whitehaven hoax, then when are we?"
Mr de Govrik said the ASX needed to be more flexible.
"ASX should be able to exercise some discretion under its rather rigid operating rules to cancel trades in extreme circumstances such as these. If I was a seller I would be a bit concerned, especially if I sold near the bottom of the market on the day."