Quick Facts
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Fine Amount: $3,880,100 AUD
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Primary Violation: Breaching Rule 3.1.2(1)(b)(iii) of ASIC Market Integrity Rules (Futures Markets) 2017 by permitting orders that created a false or misleading appearance in the market
- Regulator: Australian Securities and Investments Commission (ASIC)
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Relevant Period: 15-May-23 > 23-Feb-24
- Fine Date: 2-Sep-25
Overview
Societe Generale Securities Australia Pty Limited (SocGen) received an infringement notice from ASIC for permitting 33 client orders in electricity and wheat futures on the ASX 24 market that impacted daily settlement prices (DSP) in a manner creating a false or misleading appearance.
The total penalty was $3,880,100, stemming from failures to reasonably suspect manipulative intent despite patterns of late orders benefiting clients' positions. SocGen complied with the notice, which does not constitute an admission of guilt or contravention of the Corporations Act 2001.
Details of the Case
SocGen, a major market participant on the ASX 24 futures market, provided direct market access (DMA) to clients of its parent company, Societe Generale S.A. (SGSA), allowing them to place orders through SocGen's terminals.
Between May 2023 and February 2024, two clients placed orders near market close that altered the DSP, a reference price calculated based on late trades and orders, for electricity and wheat futures contracts. These orders consistently moved the DSP in directions favorable to the clients' existing positions, generating mark-to-market benefits and potentially reducing margin requirements.
ASIC's Markets Disciplinary Panel (MDP) determined that SocGen ought to have reasonably suspected manipulative intent under Rule 3.1.2(1)(b)(iii), considering factors like order timing, market impact, trading patterns, client interests, and lack of commercial rationale. Despite prior ASIC communications highlighting volatility and manipulation risks in futures markets, SocGen's surveillance initially failed to detect the issues.
After inquiries, SocGen tightened controls, including activating alerts for late orders, and imposed trading restrictions on one client. The breaches occurred across three periods: electricity orders from 15 May to 13 July 2023, wheat orders from 9 to 31 October 2023, and further wheat orders from 2 January to 23 February 2024.
WORKED EXAMPLES
- Electricity Futures Order (15 May 2023): Client One placed Order 1 in contract BVZ6 as a buy for 1 quantity at 15:59:45.294, 15 seconds before close. No MTC alert was triggered.
- Price significance: $1 higher than the prevailing best bid from the previous day.
- Type: Order (not trade).
- DSP impact: Increased by $1 or 1.72%.
- Aggregate benefit for the date: $13,248 mark-to-market gain.
- Electricity Futures Order (18 May 2023): Client One placed multiple orders (Orders 3-6) across contracts BVZ6, BVU6, BQZ6, and BVM6, all buys for 1 quantity at 15:59:48, 12 seconds before close. No MTC alerts.
- Price significance for BVZ6: $1.24 higher than last trade; BVU6: $0.85 higher than last traded price (strip trade); BQZ6: $1.39 higher than last traded price (strip trade); BVM6: $0.82 higher than last traded price (strip trade).
- Type: Orders.
- DSP impacts: BVZ6 ▲ $1.24 or 2.04%; BVU6 ▲ $0.85 or 0.93%; BQZ6 ▲ $1.39 or 1.66%; BVM6 ▲ $0.82 or 0.91%.
- Aggregate benefit for BVZ6: $82,765; others not specified individually.
- Electricity Futures Orders (5 June 2023): Client One placed Orders 7 and 8 in contracts GNH4 (sell) and BNH4 (buy), both for 1 quantity at 15:59:57.251, 3 seconds before close. This triggered a SAR from another participant for suspected marking the close.
- Alerts: For GNH4, "Market dominance at close (account) (sell)"; for BNH4, none.
- Price significance: GNH4 $1.75 lower than best offer; BNH4 $1.40 higher than best bid and $0.70 higher than last trade.
- Type: Trades.
- DSP impacts: GNH4 ▼ $1.25 or 3.01%; BNH4 ▲ $0.70 or 0.47%.
- Aggregate benefit for date: $329,675 (primarily from GNH4).
- Electricity Futures Orders (6 June 2023): Client One placed Orders 9 and 10 in contracts GNH4 (sell) and BQH4 (buy), for 1 quantity, at 15:59:56.658 and 15:59:59.221 respectively, 3 seconds and 1 second before close.
- Alerts: Both triggered "Significant volume in last 2 minutes of trading alert".
- Price significance: GNH4 $3 lower than best ask, $0.5 lower than last trade; BQH4 $2 higher than best bid, $1.75 higher than last trade.
- Type: Trades.
- DSP impacts: GNH4 ▼ $0.50 or 1.2%; BQH4 ▲ $0.29 or 0.19%.
- Aggregate benefit for date: $164,280 (from GNH4).
- Wheat Futures Order (9 October 2023): Client Two placed the first Wheat Futures Order (Order 17) for 15 wheat futures contracts 30 seconds before market close.
- Impacted the DSP by 0.37% in a favorable direction.
- Generated a mark-to-market benefit of $101,250.
- This was Client Two's only order in the contract that day, with no prior activity; occurred after ASIC's general warnings on manipulation.
- Wheat Futures Order (10 October 2023): Client Two entered another order (Order 18) in the last 30 seconds.
- Altered the DSP by 0.49% beneficially.
- Created a mark-to-market benefit of $135,000.
- Matched with resting orders available earlier, suggesting intent to influence DSP.
- Wheat Futures Order (31 October 2023): A further order (Order likely 24) placed in the last 30 seconds.
- Impacted the DSP by 0.64% favorably.
- Resulted in $154,000 mark-to-market benefit.
- Occurred after ASIC's inquiry on 18 October 2023 regarding Client Two's trading, but before SocGen's full alert enhancements.
- Wheat Futures Orders in Third Period (January-February 2024): Client Two placed 14 orders (Orders 25-38, but document lists 17 total, so 20-33? Wait, 17 total from 9 Oct to 23 Feb), each 2 to 16 seconds before close.
- Impacts: DSP changes of 0.41% to 2.23% favorable.
- Benefits: $37,680 to $744,975 per order, average $262,034.
- Client Two was often the sole participant in WMH4 during the final minute; continued despite ASIC's December 2023 letter on surveillance inadequacies.
Fines and Penalties
The total penalty was $3,880,100.
Key Quotes
"The MDP considered that SocGen breached the ASIC Market Integrity Rules (Futures Markets) 2017 (Rules) by allowing the Electricity Futures Orders to be placed on the ASX 24 market when it ought to have reasonably suspected that those orders were placed with the intention of creating a false or misleading appearance with respect to the market for, or the price of, the contract." (From the infringement notice)
"[A]s a proactive step, market participants should check that their trade surveillance alerts are fit for purpose and operating as intended." (From ASIC's Market Integrity Update, June 2022 and March 2023)
"ASIC expressed concern as to 'whether SG has adequate surveillance alerts and processes to enable SG to detect and address potentially manipulative trading behaviour entered into the market through its terminals'." (From ASIC's letter to SocGen, 19 December 2023)
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