Stockholm Stock Exchange’s disciplinary committee fines Timber Hill Europe AG (11/07)

Timber Hill is a member of the Stockholm Stock Exchange. According to the Stockholm Stock Exchange’s rules for member companies, orders placed in the order book, automatically matched trades and manual trades must reflect the current market value of the instrument in question. “Current market value” is defined as prices that, upon a comprehensive assessment, reflect the current pricing on the basis of such factors as changes in the pricing of the instrument during the relevant exchange day and previous exchange days, the volatility of the instrument and general changes in the pricing of comparable instruments. Members have the same responsibility for automatically routed orders as for orders placed in another way in the trading system. Members must also take technical and administrative actions to ensure that orders routed via Automatic Order Routing do not violate the rules.

On three occasions, in October 2005 and in July and November 2006, there were instances of automatically routed sell and buy orders placed via Timber Hill in a manner that deviated from the prevailing market value. In addition, in November 2006, Timber Hill placed an order during the closing call that deviated from the prevailing regulations. In the latter case, however, the trades that were generated by the order were canceled after Timber Hill had stated that the order had arisen accidentally. Following remarks from the Exchange, Timber Hill has introduced a function in its trading application aimed at preventing deviations of the said kind.

The Disciplinary Committee believes that it can occasionally be difficult to apply the rules and that an occasional breach should not give rise to disciplinary repercussions. In the case at hand, however, the Exchange had repeatedly pointed out the regulations and, in view of this, the breaches cannot be regarded as being of a minor nature. Accordingly, the Disciplinary Committee fines Timber Hill Europe AG SEK 200,000.