UBS Securities Australia pays $120,000 penalty over alleged violation of market integrity rules

Maria Nikolova

A number of transactions in relation to six on-market buy-backs conducted by UBS on the ASX market in 2017 were not in the ordinary course of trading and were not in accordance with the clients’ instructions.

UBS Securities Australia Limited has paid a $120,000 penalty over alleged violation of the ASIC Market Integrity Rules (ASX Market) 2010. The company has been given an infringement notice by the Markets Disciplinary Panel ( MDP).

The MDP found that a number of transactions in relation to six on-market buy-backs conducted by UBS on the ASX market in 2017 were not in the ordinary course of trading and were not in accordance with the clients’ instructions.

UBS purchased approximately 18 million securities over a 7-month period in relation to the buy-backs in circumstances where UBS purchased the securities other than by the matching of orders on an order book.

In particular, UBS entered into a total of 190,626 trades on the ASX Market in relation to these six buy-backs. Of those, 328 trades were entered into over a 7-month period in circumstances where UBS:

  • acted on behalf of each respective buy-back client and a selling client; and
  • entered into them other than by the matching of Orders on an Order Book; and
  • reported the transactions to ASX as Trades with Price Improvement (NXXT).

The 328 NXXT trades resulted in purchases of more than 18 million securities by UBS on behalf of their buy-back clients. The percentage of NXXT buy-back trade volume transacted by UBS as compared to total buy-back volume transacted by UBS ranged from approximately 10%, 6% and less than 1% (in the case of three of the buy-backs) and from approximately 22%, 25% and 55% (in the case of the other three buy-backs).

The matter was brought to the attention of UBS by the Australian Securities & Investments Commission (ASIC). UBS did not self-report the matter to ASIC.

ASIC Regulatory Guide states that ‘Trades with Price Improvement’ are not in the ordinary course of trading and are not permitted for on-market buy-backs.

The MDP finds that UBS’ conduct was careless, as the DTRs did not know that NXXT trades were not in the ordinary course of trading. This indicates that UBS did not have effective internal training or communication procedures in place, despite ASIC guidance that such trades were not permitted for on-market buy-backs. Furthermore, the conduct occurred over a 7-month period for multiple buy-backs without UBS’s compliance team detecting the issue. This indicates that UBS also did not have effective internal controls in place.

Moreover, an on-market buy-back is a kind of corporate action. Participants should be aware that the trading rules in relation to corporate actions are different to the rules that would apply to trading that does not relate to corporate actions and should put in place appropriate supervisory procedures for corporate actions to ensure compliance with the rules.

Finally, in executing the trades as NXXT trades, UBS may have caused the buy-back client to contravene the Act because not all the buy-back trades were in the ordinary course of trading.

UBS has subsequently adopted remedial measures including conducting further training for the traders, updating the equities desk manual, and is implementing or developing trade monitoring enhancements.

UBS has been previously sanctioned by the MDP:

  • in May 2017, the MDP issued an infringement notice (penalty $140,000) relating to the operation, use and monitoring of a crossing system known as the UBS Price Improvement Network (“UBS PIN”). A deficiency in the hard-coded logic within UBS PIN caused partially filled Orders to lose priority in certain circumstances.
  • in May 2017, the MDP issued an infringement notice (penalty $140,000) relating to incorrect disclosures in crossing confirmations about execution venue and trading as principal, and the provision of incorrect regulatory data to market operators. The incorrect disclosures were caused by system errors which were not detected for 14 months (incorrect disclosure of execution venue) and 10 months (incorrect disclosure in relation to trading as Principal).
  • in June and September 2013, the MDP issued two infringement notices (respective penalties $30,000 and $50,000) relating to accidental data entry errors when submitting orders.

The MDP accepts that there was no intention to contravene the market integrity rules. The conduct neither caused financial loss to UBS’ clients or to third parties nor benefitted UBS beyond the brokerage that would otherwise have been received by UBS.

The compliance with the infringement notice is not an admission of guilt or liability, and UBS is not taken to have contravened subsection 798H(1) of the Corporations Act.

Read this next

Executive Moves

Crculus taps Michael Idzkowski as head of sales

Michael Idzkowski has joined Crculus, a UK-based startup that describes itself as a multi-custody middleware infrastructure for financial institutions, in the post of its head of sales.

Retail FX

ActivTrades jumps on fractional stock trading bandwagon

CFDs and FX broker, ActivTrades has updated its trading offering to provide its clients with the opportunity to trade fractions of stocks.

Digital Assets

BitMEX to list its native token by end of 2023

BitMEX CEO Alexander Hoeptner said the crypto exchange is planning to list its native token, called BMEX, on the spot market by the end of the year.

Market News

Forex investments take over popular sentiment as a worthy global trend

Quite the confusion is afoot in the financial markets. Tighter regulation, rising inflation, energy sector disruptions, social unrest and wars have taken a toll on the world’s economies. How come Forex, as a means of investment, has come up on top as a global trend in 2022? Against the backdrop of current events, the international broker’s expert team at OctaFX has gathered some answers.

Crypto Insider, Metaverse Gaming NFT

How Hiding Crypto’s Influence Will Be Key To Unlocking Its Success

In past years, cryptocurrency has advanced well beyond the technophiles responsible for its initial success to reach widespread name recognition. Crypto has found its way into news, music, culture, and other relevant facets of daily life. 

Digital Assets

SCRYPT Digital taps Enclave Markets to mirror dark pool trading in crypto

“A service like this has been sorely lacking in the crypto space. There hasn’t been a solution that provides the security or privacy that institutions require with these kinds of trades.”

Institutional FX

FXSpotStream reports record monthly volume at $1.613 trillion

Trading volumes on institutional FX platforms surged in September after fears over the impact of recent developments around Russia’s military invasion of Ukraine sent speculative asset classes reeling.

Industry News

OKX adds four-time Olympian snowboarder Scotty James as brand ambassador

‘What is OKX?’ is the name of the new multi-milion dollar brand campaign launched by crypto exchange OKX as part of its efforts toward world expansion.

Industry News

Circle buys Elements and announces beta version of Crypto Payments API

“Lowering barriers of entry for payments and financial services and establishing dollar payments utility are core to Circle’s mission.”