QUICK FACTS
Macquarie Bank finE Overview
The Australian Securities and Investments Commission (ASIC) has initiated legal proceedings in the NSW Supreme Court against Macquarie Securities (Australia) Limited (MSAL). ASIC alleges that MSAL engaged in misleading conduct by misreporting millions of short sales to the market operator over a period spanning more than 14 years.
ASIC's lawsuit alleges that between December 11, 2009, and February 14, 2024, the firm failed to correctly report the volume of its short sales by at least 73 million. ASIC estimates the total volume of incorrectly reported short sales could range from 298 million to as high as 1.5 billion.
The regulator claims that this prolonged misleading conduct stemmed from multiple systems-related issues, many of which went undetected for over a decade. ASIC contends these failures may have caused the financial services industry to rely on misleading and false information for over 14 years.
Furthermore, ASIC alleges that MSAL failed to correctly report Regulatory Data for 633,680 orders submitted to the Market Operator between November 16, 2022, and March 21, 2023.
A THIRD Intervention Since Sep-24
In September 2024, Macquarie was fined AUD 4.995 million by ASIC’s Markets Disciplinary Panel for failing to prevent suspicious orders in the electricity futures market. Just last week ASIC acted further against Macquarie for additional compliance failures.
These were covered in our previous blogs here:
SPECIFIC DETAILS
- Issue 1: Incorrectly including duplicate "dummy fills" as actual covered short sale transactions in reports. This issue alone is alleged to have resulted in 6,044,016 short sales being incorrectly reported between June 17, 2022, and October 5, 2022.
- Issue 2: Truncating trade references used to calculate short sale volumes, leading to the exclusion of trades with cross-references of four or more characters. This allegedly caused 53,323,242 short sales to be misreported between December 11, 2020, and October 31, 2022.
- Issue 3: Incorrectly including "booking purpose trades" executed on Cboe Australia in the calculation of covered short sales. This is said to have led to 19,310 misreported short sales between June 14, 2022, and August 9, 2023.
- Issue 4: Erroneously excluding "unbooked principal positions" when calculating the total volume of Principal Short Sales. This impacted reports between June 14, 2022, and December 21, 2022, with an estimated misreporting of between 2.6 million and 4.35 million short sales.
- Issue 5: Incorrectly excluding Principal buy trades in certain ASX crossing scenarios from the Principal Replay Function. This issue is alleged to have persisted from approximately October 2011 to December 21, 2022, with an estimated misreporting of between 28.4 million and 56.8 million short sales.
- Issue 6: The Principal Replay Function incorrectly replaying all ASX principal trades first, then all Cboe Australia principal trades, rather than in strict chronological order. This impacted reports from approximately October 2011 to December 21, 2022, leading to an estimated misreporting of between 107.1 million and 149 million short sales.
- Additional Detail: MSAL executed 1 million principal shorts on the ASX at 10:00 and 900k principal buys on Cboe at 10:05. Because the system replayed all ASX trades first, it recorded a net short of 1 million at 10:05. When the Cboe buy leg was eventually replayed, that offset appeared hours later, inflating the published short volume by the full 900 k for the official report. If the total daily figure for that security was 1.8 million shares traded, the mis-statement (900 k) equated to a 50 % error - well above ASIC’s 12 % average.
- Issue 7: Short Sale Reports not always including certain trades completed or amended after 5:00 PM. This occurred between December 11, 2009, and February 14, 2024, with an estimated misreporting of between 79.6 million and 637 million short sales.
- Issue 8: An incorrect automatic adjustment process in the IT Portal when manual intraday bookings were made for certain short sell "direct market access" (DMA) trades. This affected reports between December 11, 2009, and February 2, 2023, with an estimated misreporting of between 1.3 million and 15.3 million short sales.
- Issue 9: Some Short Sale Reports being extracted prior to the completion of the data extraction process, rendering them incomplete. This occurred between December 11, 2009, and May 15, 2023, with an estimated misreporting of between 19.8 million and 636 million short sales.
Select QUOTES
- ASIC Chair Joe Longo: "This action is timely given significant recent global market volatility. Accurate and reliable data underpins the integrity of, and confidence in, Australia’s financial markets. Investors expect reliable information to analyse market movements and inform their investment decisions."
- ASIC Chair Joe Longo: "MSAL’s repeated systemic failure to detect and resolve these issues indicated serious neglect of its systems and disregard for operational controls and technological governance."
- ASIC Statement: "Market Participants must ensure that their systems, controls and governance arrangements are robust and fit for purpose to comply with their regulatory obligations."
Sources:
