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Jarden hit with $40k penalty

Jarden has been publicly censured and ordered to pay $40,000 plus costs for failing to keep a watchful eye on the filters in place for its clients with direct market access.

Tuesday, August 31st 2021, 7:16AM

by BusinessDesk

In June last year, one of Jarden’s customers with direct market access (DMA) made a series of trades using an algorithm that contributed to pushing down Mainfreight’s price 9.8% in the space of 40 minutes. The order was a mistake and would’ve been picked up had one of Jarden’s filters been activated. However, the company had turned it off a year earlier to address an issue and hadn't realised it failed to turn it back on.

“Jarden had also not conducted regular reviews of its DMA filters as part of its compliance monitoring programme, despite NZ RegCo previously highlighting the need for Jarden to specifically monitor key areas including DMA in its onsite inspection reports of 2018 and 2019,” the markets disciplinary tribunal said.

Algorithmic trading and direct market access for clients have caught out broking houses in the past. In 2019, Macquarie Securities was censured for failing to discover one of its direct market access customers made more than 100 algorithmic trades over 10 months without a change in ownership, and in 2018 Craigs Investment Partners was censured for a similar lapse.

In 2015, Jarden – then called First NZ Capital – was censured for trying to fix a trading error without telling the market operator when an order stopped by a DMA filter was mistakenly put through manually.

Keeping order

The tribunal today said Jarden’s breaches related to a number of fundamental obligations under the stock market’s rules, including the need to maintain an orderly market and to ensure DMA filters are in place.

“The tribunal is also concerned that the Mainfreight trades highlighted a number of compliance system failures within Jarden, which the tribunal considers did not meet the standards expected of a trading participant,” it said.

Jarden acknowledged its internal monitoring wasn’t adequate and had since set up a monitoring task to check the filters and updated its policies and procedures to ensure greater detail was taken when addressing market alerts. Those actions were mitigating factors in a settlement the investment house reached with NZX’s RegCo over the censure and penalty.

The tribunal said aggravating factors included the failure to maintain an orderly market, the length of time where no adequate filter was in place, the inadequate monitoring despite being advised by RegCo, the post-monitoring failure, and previous enforcement for failing to have adequate filters in place.

Taking those factors into account, the tribunal considered the breaches were at the lower end of the of the penalty band for serious breaches, with financial penalties rising as high as $500,000.

« [The Wrap] Who's tougher? FMA or ASICTSB fined $3.5m for anti-money laundering act breaches »

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