Macquarie Bank has been fined a record $4.995 million by the Markets Disciplinary Panel (MDP) following an investigation by the Australian Securities and Investments Commission (ASIC).
The penalty was imposed for Macquarie's failure to prevent suspicious orders placed on the electricity futures market between January and September 2022, marking the largest fine ever handed down by the MDP.
The investigation revealed that Macquarie allowed three of its clients to place 50 suspicious orders designed to manipulate the daily settlement price of electricity futures contracts.
The orders were placed within the last minute of market close, influencing the price in a direction that favored the clients' existing positions. These actions, described as “marking the close”, were deemed to create a false or misleading appearance of active trading in the market.
ASIC Chair Joe Longo emphasised the severity of Macquarie's failure to detect and prevent market manipulation, stating, "The record penalty imposed by the MDP reflects serious, prolonged, and potentially systemic failures." Despite repeated warnings from ASIC, Macquarie did not take sufficient action to close gaps in its surveillance, allowing further suspicious trades to continue.
Despite multiple warnings from ASIC regarding suspicious trading activity, Macquarie repeatedly failed to take timely action. The MDP found that the bank’s lack of response to concerns, particularly during a period of heightened volatility in global energy markets due to the Russia-Ukraine conflict, aggravated the situation.
The manipulation of energy markets can lead to broader economic impacts, including higher energy prices for consumers, further exacerbating the cost of living pressures. Longo noted that by allowing such orders to go unchecked, Macquarie’s actions could have affected supplier funding costs, with potential downstream effects on consumer energy bills.
Macquarie’s failure to adequately monitor the electricity futures market and its deficient surveillance capabilities were critical factors in the MDP’s decision to impose the record fine. The bank, which accounted for 58% of all electricity futures orders on the ASX 24 market in 2022, was found to have failed in its obligations as a market participant and did not fully appreciate the seriousness of its role.
The MDP also highlighted potential systemic issues within Macquarie’s internal culture and reporting processes, as critical matters were not escalated as they should have been.
Macquarie did not contest the allegations, paid the fine, and complied with the infringement notice. However, payment of the fine does not constitute an admission of guilt or liability.
The penalty comes amid increased scrutiny of market misconduct in energy and commodities derivatives markets, which was a priority for ASIC enforcement in 2023.
Other notable penalties in 2024 include J.P. Morgan Securities Australia Limited, fined $775,000 in May for similar market gatekeeper failures, and ongoing proceedings against COFCO International Australia Pty Ltd for alleged manipulation in the wheat futures market.