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The London Stock Exchange has fined an unnamed stockbroking firm £35,000 for allowing a client to rig the market through what is known as "layering" the electronic order book.
The Financial Services Authority is also believed to be investigating whether the client - believed to be a substantial institutional investor - is guilty of market abuse.
The fine imposed by the Stock Exchange is one of the largest it has made public. It can fine member firms up to £50,000 for failing to have adequate controls or systems. In this case the firm was warned of that - as were other firms acting for the same client - several times between October 2007 and January last year. Despite this, the alleged offence was committed in October last year.
Layering was fairly common practice when the electronic order book was first introduced but has been weeded out in recent years. It is when a client who has direct access to the electronic order book puts in multiple buy or sell orders to create the impression of high liquidity with the ultimate intention of either selling at an artificially high price or buying at a deceptively depressed price.
Reader views (2)
So no naming or shaming then? C'mon, the SEC knocks the spots off London for white collar crime investigations. How come Blue Oar gets a public telling off but not this lot?
- Sally Sunshine, The Village, 29/06/2009 21:06
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Oh wow! £35k. That'll bankrupt them, eh? Bet they're really sorry they did it. Shedding tears of contrition, no doubt. Probably all going to jump off London Bridge, the guilt being too much for them. Boy, that Stock Exchange is really hard-ball, eh?
- John Problem, Hackney UK, 29/06/2009 16:31
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