The corporate watchdog ASIC is investigating whether market indexes such as the ASX 200 and other benchmarks for interest rates and foreign exchange are being manipulated.
“Financial benchmarks can have flow-on effects to ordinary investors and borrowers,” says ASIC Commissioner Cathie Armour.
The watchdog confirmed it is looking at local and foreign financial institutions operating in Australia, and the actions of their traders and their managers.
There’s an enormous benefit to whoever manages to move an index up or down.
This can be done by the way client orders or positions are handled such as by deliberately triggering stop-loss orders or by disclosing orders to traders at competing financial institutions.
The investigation to determine whether or not there has been benchmark-related misconduct in Australia is complex and is expected to take some. “ASIC’s investigations are ongoing and no conclusions have been drawn yet,” says Armour.
A key focus of the investigation is whether financial institutions have failed to adequately supervise and control the day-to-day operations and conduct of traders. The role of senior managers will also be looked at.
She was commenting on the release of an ASIC report on financial benchmarks.
“Given their importance, it is critical to market confidence that financial benchmarks are robust and reliable,” says Armour.
“Financial institutions must get this right. That is, have the right culture, oversight, and incentives in place to make sure they do not abuse client trust and threaten market confidence.”
The benchmarks being looked at are:
- Bank Bill Swap Rate (BBSW).
- The Interbank Overnight Cash Rate (cash rate).
- S&P/ASX 200 equity index.
- ASX Clear (Futures) Pty Ltd’s Commonwealth Government Securities.
- Yields survey for settling bond futures.
- Consumer Price Index (CPI).
“Our inquiries are ongoing and are informed by the types of benchmark-related conduct and oversight issues that have been observed overseas,” ASIC says in its report.
“We will take enforcement action where we consider there has been conduct that is unlawful under the Corporations Act 2001, Australian Securities and Investments Commission Act 2001 (ASIC Act) or other applicable legislation that we administer.”