ONE OF the largest ASX market participants, Societe Generale Securities Australia Pty Limited (SocGen), has been fined $3.88 million for failing to prevent suspicious orders from being placed on the wheat and electricity futures markets.

An ASIC investigation found SocGen, a subsidiary of international banking giant Societe Generale SA, breached market integrity rules by allowing two of its clients to place 33 suspicious orders from May 2023 to February 2024.

This comes over a year after the regulator fined JP Morgan Securities Australia $775,000 for failing to prevent suspicious orders by its clients in the ASX24 wheat futures market.

ASIC later commenced civil proceedings against grain trader COFCO International Australia Pty Ltd and COFCO Resources SA for the alleged manipulation which JP Morgan allegedly failed to prevent.

Wheat contract manipulation

The SocGen investigation examined a single client who placed 17 wheat futures orders for WMF4 (January 2025 delivery) and WMH4 (March 2025 delivery) contracts.

These orders occurred in two blocks: from 9 October 2023 to 31 October 2023, and from 2 January 2024 to 23 February 2024.

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

The quantities ordered ranged from 10 to 25 lots.

According to ASIC’s infringement notice, the orders were placed in the final minute of trading, some within two seconds of the close, and resulted in changes to the Daily Settlement Price.

ASIC found the October trades generated $390,250 in benefits for the client, while early 2024 trades produced mark-to-market position gains of $37,680-$744,975, with an average of $262,034.

ASIC warning to SocGen

Following the allegedly suspicious orders in early October 2023, ASIC contacted SocGen seeking information about the trading activity.

A week after this contact, the client made another order which followed the suspicious pattern of the earlier trades.

SocGen responded by tightening surveillance controls on orders made in the last minute of trading and those establishing the closing price.

The company did not opt to restrict the client from engaging in suspicious conduct.

The client ceased its suspicious trading activity for two months before making 14 notable orders in January and February 2024.

“Societe Generale Securities Australia Pty Ltd has taken appropriate remedial actions to address the issues raised by ASIC,” a Societe Generale spokesperson said.

Regarding the wheat and electricity contracts, ASIC chair Joe Longo said SocGen should have suspected the orders were submitted with the intention of creating a false or misleading appearance in the market.

He said it was found that the company was reckless in failing to prevent further suspicious orders following ASIC’s repeated warnings.

“ASIC contacted SocGen on five occasions in 2023 to serve notices, ask questions or raise concerns about volatility in futures markets and suspicious orders placed by its clients,” Mr Longo said.

“Despite ASIC’s contact, SocGen failed to take timely and effective action, and permitted additional, suspicious orders to enter the market.

“SocGen’s lack of response and inadequate remediation were made more significant because they are the second largest participant in the ASX 24 Market.”

Mr Longo said the regulator was alarmed that the circumstances indicated a lack of effectiveness of SocGen’s compliance and surveillance functions to detect and address manipulative market behaviour.

“Market gatekeepers have a duty to keep our markets safe.

“They have direct visibility over client trading and can prevent orders from being placed on the market.

“Missing suspicious orders puts the entire system at risk.

“Companies like SocGen must have appropriate preventative and detective tools and controls, including people with the right expertise as well as surveillance software, to ensure compliance.”

SocGen has complied with the infringement notice and paid the penalty.

Compliance with the infringement notice is not an admission of guilt or liability.

Source: ASIC