OSE, TSE take disciplinary action against Mitsubishi UFJ Morgan Stanley Securities over spoofing

Maria Nikolova

OSE has imposed a JPY 40 million fine on the company and has ordered suspension of trading of government bond futures on the company’s proprietary account by its department handling trades in financial markets.

Osaka Exchange, Inc. (OSE) and Tokyo Stock Exchange, Inc. (TSE) today announce they have taken disciplinary action against Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.. over a practice known as spoofing.

During market surveillance of the OSE market, Japan Exchange Regulation (JPX-R) had detected activity suspected to be a form of market manipulation known as spoofing with respect to proprietary trading of Japanese government bond futures by the company, an OSE Trading Participant, and explained the details of the situation to the company in November 2017. Thereafter, JPX-R analyzed such proprietary trading in detail and reported the result of the investigation to the Securities and Exchange Surveillance Commission (SESC).

The SESC investigated the case in detail, and then concluded that such proprietary trading falls under market manipulation that is prohibited by the Financial Instruments and Exchange Act. On June 29, 2018, the SESC recommended to the Financial Services Agency (FSA) to issue an Administrative Monetary Penalty Payment Order against the Company. The FSA ordered the company to pay an administrative monetary penalty of JPY 218.37 million.

In the course of making successful bids for Japanese government bonds (JGB) in the primary market and then selling them on to its customers, the company trades JGB futures on its proprietary account mainly for the purpose of hedging the risk of changes in the prices of its holdings of JGBs. The rates trading section in the department handling for trading in financial markets is in charge of such transactions.

On August 25, 2017, with respect to September 2017 contracts of 10-year JGB futures traded at OSE, a government bond dealer in the section devised a way to adjust positions at advantageous prices. With the aim of inducing orders from other investors, the dealer conducted trades and placed orders on the company’s proprietary account in order to mislead other investors into believing that trading of the contract was thriving, which would artificially move the price of the contract favorably.

In particular, the investigation has found that, on August 25, 2017, the dealer repeatedly conducted the following acts between 6:34 p.m. and 7:09 p.m. during the night session, when liquidity is relatively lower than in the day sessions.

(1) Selling at higher prices resulting from spoof buy orders

  • The dealer placed large buy orders at prices ranging from the best bid price to approximately five ticks lower with no intention of executing them (spoof buy orders for a total of 6,253 contracts).
  • The spoof buy orders led other investors to place buy orders at higher prices, and the dealer placed proprietary sell orders to match them. These sell orders were executed (total 177 contracts).
  • The dealer cancelled the spoof buy orders a few seconds later.

(2) Buying at lower prices resulting from spoof sell orders

  • The dealer placed large sell orders at prices ranging from the best offer price to approximately three ticks higher with no intention of executing them (spoof sell orders for a total of 1,844 contracts).
  • The spoof sell orders led other investors to place sell orders at lower prices, and the dealer placed proprietary buy orders to match them. These buy orders were executed (total 158 contracts).
  • The dealer cancelled the spoof sell orders a few seconds later.

OSE and TSE explain that the above acts are deemed to fall under the act prohibited by Article 159, Paragraph 2, Item 1 of the Financial Instruments and Exchange Act (market manipulation).

As a result, OSE has decided to impose a JPY 40 million fine on the company and to suspend trading of government bond futures and options on government bond futures on the company’s proprietary account by its department handling trades in financial markets (excluding trades approved by OSE on a case-by-case basis, such as those required to fulfill outstanding contract obligations) during the period from October 9 to October 11, 2018

TSE is censuring the company.

Read this next

Retail FX

Investors from Cyprus and Dubai acquire ‘significant stake’ in M4Markets

Seychelles-regulated brokerage firm M4Markets firm has picked up some investment from Cyprus and Dubai based investors in a new funding round that it will be using to grow its business.

Executive Moves

UAE broker Amana elevates Amr Masry to sales director

Amr Masry has been promoted to a new senior role at Amana Capital, becoming the group’s newest Sales Director, following a successful tenure with the UAE-based FX and CFDs broker.

Executive Moves

TopFX promotes Omar Al-Janabi to head of sales and business development

Prime brokerage firm TopFX has strengthened its Middle East operations with the promotion of Omar Al-Janabi, who is taking on an expanded role as global head of sales and business development.

Retail FX

Plus500 says 2022 revenue to be ‘significantly’ ahead of analysts’ estimates

Israeli-based, but London-stock market listed Plus500 said it expects annual revenue and earnings to be ahead of analysts’ estimates even as trading levels normalised from record volumes in the first quarter.

Digital Assets

Crypto derivatives giant BitMEX launches spot market

Crypto exchange BitMEX is looking to branch out of its singular focus on crypto derivatives with a suite of new product offerings. Although derivatives are to remain at the heart of BitMEX’s business, the popular platform will add spot crypto trading as it aims to aggressively grow their user base.

Uncategorized

PrimeXM reports mixed trading volumes for April

PrimeXM has reported weaker trading volumes for April 2022, in line with other institutional and retail platforms that saw the activity of their clients dropped compared to a month earlier.

Digital Assets

DLT Finance approved by BaFin to support brokerage and custody of digital assets

DLT Finance is already partnered with big names within the digital asset space, including Kraken, Bitstamp, B2C2, and Bittrex.

Institutional FX

LUKB taps vestr to launch actively managed products, AMCs

The partnership with vestr goes to show the growing importance of digitising the active investment management space.

Digital Assets

Jewel taps Tokeny to launch stablecoin-as-a-service solution on Polygon

Jewel aims to offer a stablecoin-as-a-service solution to other digital asset and financial institutions B2B, allowing those businesses to provide cheaper, easier and near real time payments with stablecoins issued and redeemable directly at the bank level at Jewel.

<