THE integrity of trading on the Australian Securities Exchange was called into question last night after a series of unusual transactions raised the spectre of market manipulation.
Shares in more than eight blue-chip stocks - including ANZ Bank, Commonwealth Bank, Brambles, AGL, Bank of Queensland, Ansell and Aristocrat - saw massive spikes in their share prices in the seconds after they began trading at 10am yesterday.
The share purchases, which are being examined by the Australian Securities and Investments Commission, were placed at 9.47am by a yet-to-be identified seller. It is believed the client was trading from overseas. The initial prices of those orders were in line with the previous day's closing price.
At 9:59.54 - six seconds before trading commenced - the mystery seller amended the price and volume on share orders.
Such was the speed of the amendments that brokers and traders last night told BusinessDay that a computer program must have been used to make the changes. The changes inflated the opening share price of the companies for a few seconds and, as a result, lifted the opening price of the S&P/ASX 200 Index, which tracks the 200 most valuable companies in the country.
The trades were large enough to affect the prices of options traded on the S&P/ASX 200 Index. That index rose to 4606 on the back of the moves, breaking through the 4600 barrier for the first time since the global financial crisis.
Several stockbrokers noted that October futures and options that track that index expired yesterday, and the settlement price was the inflated 4606 opening price.
Sources at Goldman Sachs last night confirmed they had been in the market and observed the unusual trades, which they believe warrant further investigation. There is no suggestion that any Goldman Sachs employee was involved with the highly unusually trading.
Only ASX 200 companies beginning with the letter A, B or C were affected yesterday.
ANZ, which closed at $25.79 on Wednesday, soared to $27.63 on the opening bell, before collapsing to $26.16. A spokesman for ASIC said it was aware of a surge in ANZ share prices and "was looking into the matter". "Market integrity is fundamental to what we do and if we detect any potential breaches of the law or market integrity rules we will take timely and appropriate action," the spokesman said.
Ivor Ries, a senior research analysis at Wilson HTM, said such a manipulation would theoretically benefit someone with a big derivative position. "You would be trying to cause the index to go through some point where you can crystallise your profit on the index.
A spokesman for the ASX said the stock exchange had alerted ASIC to the price spikes in the morning.
Brokers have complained that the shift in responsibility for control of the market from the ASX to ASIC meant that nothing was done when trades of this nature caused alarm bells to ring.
Frequently Asked Questions about this Article…
What were the unusual trades on the ASX that sparked market manipulation fears?
A series of large buy orders for more than eight blue‑chip ASX200 stocks caused sudden spikes in opening prices. Orders originally placed before the market opened were rapidly amended seconds before the 10:00am open, inflating opening prices for a few seconds and triggering concerns about possible market manipulation.
Which companies and index were affected by the opening price spikes on the ASX?
Several ASX200 companies saw spikes, including ANZ, Commonwealth Bank, Brambles, AGL, Bank of Queensland, Ansell and Aristocrat. Only ASX200 stocks beginning with the letters A, B or C were affected. The moves briefly lifted the S&P/ASX 200 Index to 4,606.
How did the timing of the orders suggest algorithmic or computer‑driven trading?
The suspicious orders were placed at about 9:47am and then amended at 9:59.54am — six seconds before trading commenced. Brokers and traders told BusinessDay the speed of those last‑second amendments was so fast it indicated a computer program or algorithm was likely used to change price and volume.
Why did the S&P/ASX 200 index briefly break the 4,600 level and why does that matter to investors?
The inflated opening prices from those few seconds pushed the S&P/ASX 200 up to 4,606. That mattered because October futures and options that track the index expired that day, and the settlement price used was the inflated 4,606, which can affect derivative settlements and the value of index‑linked positions.
Could the unusual trades have been used to benefit someone holding derivatives?
Yes. A senior research analyst at Wilson HTM, Ivor Ries, said theoretically such a manipulation could benefit someone with a large derivative position by moving the index through a point where they could crystallise profits on the index.
What are ASX and ASIC doing about the suspicious trading activity?
The ASX alerted the Australian Securities and Investments Commission (ASIC) to the morning price spikes. ASIC confirmed it was aware of the surge in ANZ share prices and said it was looking into the matter, noting market integrity is fundamental and that it will take appropriate action if it detects breaches.
Did any major broker confirm seeing the unusual trades?
Yes. Sources at Goldman Sachs confirmed they had been in the market and observed the unusual trades and said the activity warranted further investigation. The report made clear there was no suggestion any Goldman Sachs employee was involved.
As an everyday investor, should I be worried about short‑lived price spikes and what can I do if I notice them?
Short‑lived spikes can occur and may briefly affect stock prices and derivative settlements. The article shows regulators (ASX and ASIC) and brokers monitor and investigate suspicious activity. If you notice unusual price action that affects your positions, consider contacting your broker for an explanation and be aware that ASIC is the regulator investigating market integrity issues.
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