Published On: Tue, Nov 16th, 2010

ASX Disciplinary Tribunal Circular ICAP Futures Australia

The ASX Disciplinary Tribunal (the ‘Tribunal’) has determined the following:

ICAP Futures (Australia) Pty Limited (‘ICAP’) contravened Sydney Futures Exchange
Operating Rule 3.1.20(a)*. ICAP allocated trades to its client that had not been obtained
pursuant to instructions previously obtained from that client.

ICAP did not contest the contravention before the Tribunal.
The Tribunal imposed a total fine of $20,000 (plus GST).

The circumstances of the matter are detailed as follows:
• The contravention occurred on 12 April 2010. The times referred to below are times on
12 April 2010.
• At 14:53:01, ICAP’s client (the ‘Client’) placed an order to sell 100 December 2010 90
Day Bank Accepted Bill Futures Contracts (IRZ0) at 94.770 with an ICAP Representative (the ‘Representative’).
• At 14:53:08 the Representative entered (in error) an order into the Trading Platform to sell 1000 (rather than 100) IRZ0 at 94.770. This resulted in an immediate trade with an existing order in the market for 150 IRZ0 paying 94.770 (the ‘Error Trade’).
• Realising that an error had been made, the Representative canceled the remaining 850 lots of the first order. The Representative then entered a second order to buy 50 IRZ0 paying 94.770 with the intention of exiting the error position. The order partially traded for 10 IRZ0 at 94.770.
• At 14:54:20, the Client placed an order with the Representative to sell a further 100
IRZ0 at 94.770.
• At 14:54:23 the Representative canceled the remaining 40 lots of the second order. The Representative then entered a third order to sell 60 IRZ0 at 94.770.
• The Representative advised the Client by telephone that he had sold forty lots so far. The Representative allocated 40 lots of IRZ0 at 94.770, which were part of the Error Trade, to the Client’s account.
• At 14:55:18 the remaining 60 IRZO were sold at 94.770. The Representative again contacted the Client via telephone and confirmed his fill of 100 IRZ0 at 94.770.

The Tribunal determined that the contravention of Operating Rule 3.1.20 arose where the
ICAP Representative post-allocated 40 lots of IRZ0 to the Client’s account that were not
obtained pursuant to instructions already held from the Client.

In determining penalty, the Tribunal, among other things, took into account the
following matters:
a) The misconduct was not indicative of an intentional disregard of the Operating Rules or an attempt to take advantage of the situation arising from the Error Trade, but it did indicate a lack of awareness of the correct procedure to follow in order to exit an error position within the requirements of the Operating Rules;
b) ICAP did not self-report the incident (which is significant given the nature of the contravention and the circumstances involved);
c) ICAP fully cooperated with ASX Compliance in relation to the conduct of its investigation into the matter;
d) ICAP did not contest the contravention before the Tribunal;
e) The misconduct was an isolated instance and not indicative of a systemic issue;
f) ICAP’s disciplinary history; and
g) ICAP implemented various remedial measures in an attempt to prevent recurrence of the
contravening conduct including updating its compliance manual and providing specific training to the Representative involved on the correct procedure for exiting error positions and the requirements under the Operating Rules in regard to post allocation.

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