Macquarie Bank cops record-breaking fine from ASIC over dodgy energy trades

Macquarie Bank’s repeated failures to spot suspicious activity on the electricity futures market has cost it almost $5 million and a stinging reprimand from the corporate regulator.

The Australian Securities and Investments Commission said the consequence of allowing the dodgy activity could have resulted in higher power bills for customers.

Wednesday’s $4.995m penalty is the biggest ever handed down by ASIC’s Markets Disciplinary Panel.

On 50 occasions between January to September 2022, the panel said Macquarie breached market integrity rules by permitting three clients to place suspicious orders.

It said each order showed characteristics of an intention to “mark the close”, meaning each was placed within the last minute of the market close. That impacted the daily settlement price in a direction favourable to the client’s existing interest in that contract.

The panel said Macquarie should have been alert to the orders’ “intention of creating a false or misleading appearance in the market”, especially after it flagged them as suspicious.

ASIC chair Joe Lungo said the panel’s record penalty reflected the “serious, prolonged and potential systemic failures by Macquarie” to detect and prevent suspected manipulation in the energy derivatives market.

“Macquarie is the largest market participant in energy derivatives and given its role as a gatekeeper, it must ensure suspicious orders are not permitted to be placed on our markets,” Mr Lungo said.

“We put Macquarie on notice about suspicious orders placed by its clients on numerous occasions and it repeatedly failed to take timely action to address the conduct of its clients and the gap in its surveillance capability.

“As a consequence, it permitted further suspicious orders to be placed on the market. “

Mr Lungo said manipulating energy markets had a detrimental flow-on impact to supplier funding costs, and in turn energy prices — ultimately leading to higher energy bills for consumers who are already struggling with the cost of living.

ASIC said the activity occurred during a period of unprecedented volatility in global energy markets amid Russia’s invasion of Ukraine.

It had raised the issue of the suspicious orders with Macquarie on six separate occasions.

“The MDP found that Macquarie’s failure to respond to ASIC’s concerns in the context of the heightened need to monitor the electricity futures market was an aggravating factor in determining the size of the penalty,” the watchdog said.

“Further, the MDP found Macquarie had failed to appreciate the seriousness of its obligations as a market participant to act promptly and appropriately upon what were obvious risks of deficiencies in its surveillance system and had not at the time, taken full ownership or responsibility for its conduct.”