A major embarrassment for Macquarie Group (ASX:MQG) and its Macquarie Bank came from a significant reprimand by markets regulator, ASIC.
On Wednesday morning, ASIC announced that Macquarie Bank had been fined $4.995 million for failing to prevent suspicious orders from being placed on the electricity futures market.
The fine followed an ASIC investigation which found that Macquarie had breached market integrity rules on 50 occasions between January and September 2022 by allowing three of its clients to place suspicious orders.
ASIC stated that each order was placed within the last minute of market close, impacting the daily settlement price in a direction favourable to the client’s existing interest in that contract.
The fine, a record amount, was imposed by the Markets Disciplinary Panel (MDP), which makes decisions on behalf of the corporate watchdog.
The panel concluded that Macquarie should have suspected each order was submitted with the intent of creating a false or misleading appearance in the market.
“The record penalty imposed by the MDP reflects the serious, prolonged, and potentially systemic failures by Macquarie to detect and prevent suspected manipulation in the ASX 24 market for energy derivatives,” ASIC Chair Joe Longo said in Wednesday’s release.
“Macquarie is the largest market participant in energy derivatives, and given its role as a gatekeeper, it must ensure that suspicious orders are not allowed to be placed on our markets.
“The consequences of manipulating energy markets can have a detrimental impact on supplier funding costs, and in turn, on energy prices. This can lead to higher energy bills for consumers who are already struggling with the cost of living.”
ASIC said Macquarie ignored repeated warnings that it was failing to catch dozens of suspicious electricity futures transactions, which could have driven up the cost of power bills, thereby breaching market integrity rules numerous times.
The regulator noted that the conduct occurred during and after Russia’s invasion of Ukraine, which caused the price of electricity and other energy products to soar.
“We put Macquarie on notice about suspicious orders placed by its clients on numerous occasions, yet it repeatedly failed to take timely action to address the conduct of its clients and the gaps in its surveillance capability. As a result, it permitted further suspicious orders to be placed on the market,” Mr Longo said in the statement.
Shortly after ASIC’s statement, Macquarie issued a response in which a spokesperson said the bank took responsibility for “all aspects,” acknowledged the infringement notice, and had paid the $4.995 million penalty.
“Macquarie takes full responsibility for all aspects, particularly given its important role as gatekeeper and as the largest market participant facilitating clients’ activity in electricity futures in Australia and New Zealand,” the spokesperson said.
“There are lessons to be learned from this matter, and Macquarie takes ASIC’s action very seriously.
“Macquarie has implemented remediation actions to ensure that issues with monitoring suspicious orders are escalated and actioned appropriately and is continuing to work on areas for further improvement.”