Merrill Lynch Equities Australia Fined By The ASX for 21 Contraventions

In two separate reports recently issued by the Australian Exchange Disciplinary Tribunal (ASXDT) found that Merrill Lynch Equities Australia (MLEA) breached 21 ASX Market Rules during 2007 and 2008 resulting in over A$330,000 worth of fines.

The contraventions ranged from untimely trade reporting, erroneous allocation of client orders, wrong limit prices from the same trader on 3 separate occasions and an unlicensed trader accepting orders.

Having been a broker myself I know that trading errors, wrong allocations and poor reporting do happen but I am taken aback by both the same trader entering the wrong price for 3 separate trades in only a 9 week period which subsequently caused the securities to trade way away from their last price. And still more shocked that an unlicensed rep (Australia refers to them as Designated Trading representatives (DTR) ) accepting an order that happened to have a value of A$2.2million. Intro to Broking 101 says you can’t trade until you get your license. The trader should have known that they should not have accepted the order but I am more interested to know who was supervising said trader? Why was access to the trading system even granted by IT or Compliance? That transgression cost MLEA A$55,000 and 116 trades to be busted and it was entirely preventable.

On the trading desk avoiding trading errors is a point of personal pride. Once you make one you hesitate, think twice and triple check successive orders. You may even have a sit down with the head of the desk to examine the cause. I am perplexed how within a 9 week span the same trader can make 3 huge trading errors each of which were caused by entering the wrong price and subsequently adversely moving the market. One order was entered with a limit of A$0.001 and another was a 9,700,000 share order sent at market. Did you not check your work? Have you no pride? Don’t you understand your obligation to the client, the firm and the industry as a whole? You Fail! The trader did subsequently lose his job but such cavalier behavior can’t and shouldn’t be tolerated in an industry that has already been battered and bruised by the recent upheaval.

I am not an advocate for more regulation but certainly more internal controls that could have saved A$330,000 in fines and damage to the firm’s reputation which is certainly worth a lot more. It looks like Bank of America will have some house cleaning to do.

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