Societe Generale Securities Australia has been fined $3.88 million by the Market Disciplinary Panel (MDP), following an investigation by the Australian Securities and Investments Commission (ASIC).

The penalty stems from SocGen’s failure to prevent suspicious orders from being placed on the electricity and wheat futures market.

The company breached market integrity rules by allowing two of its clients to place 33 suspicious orders from May 2023 to February 2024.

This is ASIC’s fifth enforcement action in 15 months relating to alleged manipulation in electricity and wheat futures on the ASX 24 Market.

Manipulation of the daily settlement price of electricity and wheat futures contracts has the potential to impact supplier funding costs, and in turn electricity and wheat prices for consumers.

Each order displayed characteristics of an intention to ‘mark the close’, meaning they were placed within the last two minutes before market close to influence the daily settlement price for the client’s benefit.

The orders were placed during a volatile period in global energy and wheat markets caused by supply issues, including the Russia-Ukrainian conflict, creating ripe conditions for unscrupulous trading activity aimed to take advantage of and manipulate markets.

The MDP found SocGen should have suspected that all 33 orders were submitted with the intention of creating a false or misleading appearance in the market.

In its decision, the MDP noted market participants such as SocGen must be aware of, and responsible for, orders placed by their clients including orders placed through direct market access.

The MDP found SocGen to be reckless in in failing to prevent further suspicious orders following ASIC’s repeated warnings.

The MDP was also alarmed that the circumstances indicated a lack of effectiveness of SocGen’s compliance and surveillance functions to detect and address manipulative market behaviour. This included a lack of training, skills and management oversight to adequately monitor the ASX 24 electricity and wheat futures market.

SocGen is a wholly owned subsidiary of Societe Generale S.A. (SGSA) which at the end of December 2023 was ranked by assets as the world’s 19th largest bank.

In recent years, ASIC has taken enforcement action against energy and commodities market manipulation. In May 2024, the MDP fined J.P. Morgan Securities Australia Limited $775,000 for market gatekeeper failures in relation to suspicious orders by its client in the ASX24 wheat futures market.

Market misconduct in energy and commodities derivatives markets was an ASIC enforcement priority in 2023.