French regulator slaps €20m fine on Morgan Stanley & Co for sovereign bond price manipulation

Maria Nikolova

The fine is imposed for the company’s manipulation of the price of 14 French government bonds and 8 Belgian bonds, and also the manipulation of the price of an OAT futures contract.

France’s Financial Markets Authority (AMF) today announces that its Enforcement Committee has imposed a fine of of €20 million on Morgan Stanley & Co International plc for manipulation of the price of sovereign bonds and a sovereign bond futures contract.

The fine stems from the company’s manipulation of the price of 14 French government bonds (OAT) and 8 Belgian bonds (OLO) on June 16, 2015, and also from the manipulation of the price of an OAT futures contract.

The Enforcement Committee has found that, on June 16, 2015, between 9:29 am and 9:44 am, the European Government Bonds Desk at Morgan Stanley & Co International plc, located in London, aggressively purchased a significant number of French sovereign bonds futures contracts (OAT Futures or FOAT) and German sovereign bonds futures contracts (Bund Futures (FGBL) and Buxl Futures (FGBX)) on the German derivatives regulated market, Eurex. At 9:44 am, the traders sold 17 different OATs for €815 million, mainly on the MTS France and BrokerTec electronic trading platforms, and 8 OLOs for €340 million on the MTS Belgium platform.

The Committee found that the company had secured the price of the September 2015 FOAT traded on Eurex, as well as the price of 14 of the 17 OATs and 8 OLOs, at an abnormal and artificial level. The Committee concluded that the purpose of the FOAT acquisitions was to influence a price increase of this financial instrument, in order to cause an abnormal and artificial increase in the price of the OATs and OLOs, because of the correlation links between these instruments, immediately before they were sold.

The Committee determined that these acts constituted price manipulation through the use of a form of deception or contrivance, since the FOAT acquisition was inconsistent with the overall strategy of the European Government Bonds Desk and had the effect of giving other participants a distorted picture of the state of the French sovereign bond market.

However, the Committee dismissed the complaint of price manipulation of FGBL and FGBX, considering that the purpose of the operations on these instruments was not to obtain a certain price quotation so as to influence the price of the OATs.

An appeal may be lodged against this decision.

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