27 April 2015

Nasdaq OMX fines ABN Amro for algo blunder

14 January 2014  |  1364 views  |  0 Source: Nasdaq OMX

The Disciplinary Committee has issued a ruling in which ABN Amro NV is required to pay a fine in an amount corresponding to SEK 200.000.

On the morning of August 28, 2013 the SEB A share opened significantly lower than the previous day, and the Exchange subsequently decided to cancel all trades that had taken place in the opening cross.

A contributing factor to the incident was that ABN deleted a number of orders a short time before the opening. The order deletions were initiated by an algorithm used by Algorithmic Trading Group (ATG), a sponsored access client acting through ABN Amro. Said algorithm registered, amended and cancelled the orders in a manner that would never make the orders eligible for execution in the auctions. The orders were automatically amended or cancelled as soon as the limit price would equal or cross the equilibrium price of the order book. An order that is not possible to execute is not to be considered to represent true liquidity and does not constitute a genuine order. It also lacks commercial purpose.

According to NASDAQ OMX Nordic Member Rules section 4.6.1 orders placed in the Order Book must not only reflect the current market value of the instrument but also constitute genuine orders and trades, and section 4.6.2 states that a member may not place orders which are devoid of commercial purpose. In the case at hand these provisions have been violated. Pursuant to NMR section 4.10.3 a member has the same liability for orders which are placed through Sponsored Access as for orders which the member places in any other manner.

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