Stockholm Stock Exchange’s disciplinary committee fines J P Morgan Securities Ltd (12/07)

J P Morgan Securities Ltd is a member of the Stockholm Stock Exchange. According to the Stockholm Stock Exchange’s rules for member companies, members must place sell and buy orders on their own account so that they do not intentionally result in an automatically matched transaction involving buy and sell orders placed by the same member, what is known as an internal transaction. Nor may members place orders or complete transactions that in an unauthorized manner affect the price formation in the trading system or that lack a commercial purpose. Accordingly, it is prohibited to engage intentionally in the automatic matching/completion of a transaction that results in the purchaser and seller of an instrument being the same individual or legal entity. 

On several occasions in October 2006, a broker at J P Morgan, on the company’s own account, placed buy and sell orders in the trading system involving between 25,000 and 200,000 shares in Nordea in such a way that 20 cases resulted in automatically matched transactions, whereby J P Morgan traded with itself. The broker acted in contravention of J P Morgan’s internal instructions but had no intention of disturbing the market. The broker was suspended for a period and was subject to a salary deduction by J P Morgan. 

The Disciplinary Committee states that a member always has a strict responsibility for its employees’ actions insofar as they result in breaches of regulations. The Committee fines J P Morgan SEK 200,000 and issues the broker with a warning.