No one will be punished as a result of the investigation into the controversial plunge in HSBC shares in March 2009. The Securities and Futures Appeals Tribunal ruled against a decision by the regulator to publicly reprimand Christian Denk, a former Deutsche Securities Asia trader for selling down the HSBC share price by more than 10 per cent in the last seconds of the auction session on March 9, 2009. In explaining its decision, tribunal chairman Mr Justice Michael Hartmann said "it is important to recognise that, when the SFC came to make its final decision, it fully accepted that there had been no intent on the part of the applicant (Denk) to manipulate the market" and his sell orders were for "for genuine and legitimate hedging purposes". The SFC investigated to see if there was manipulation of HSBC shares after the stock fell from HK$37 to HK$33, a drop of 10.8 per cent during the 10-minute auction period. That was the worst decline in 20 years. Given HSBC shares are widely held, the decline caused a big upset and raised questions about the closing auction system, introduced in May 2008, as being open to manipulation. The HKEx scrapped the system soon after and reverted to the old way of taking the median price of the final five transactions. "The investigation did not find any manipulation," the SFC said yesterday, but said Denk's sell order for 5.4 million shares without quoting a price in the last seconds of the auction period had created "undue volatility" in the closing price of the stock. When Denk input the sell orders without a price, there was another retail investor who wanted to sell his shares at HK$33. Under the closing auction system's design, HK$33 became the closing price on that day. The tribunal said the system was unstable and that Denk was unable to view the order depth when placing his sell orders. The SFC found neither Denk nor his firm had a relationship with the investor. Denk said he was trading on behalf of Deutsche Bank London and had placed the sell orders for hedging purposes. The retail investor said he did not have sufficient funds to settle earlier buy orders of HSBC so he had to sell the shares at HK$33. While the SFC considered there was no manipulation, it said Denk's large orders created instability. "The SFC believed Denk's conduct was in breach of his obligations under the code of conduct to act with due skill, care and diligence, in the best interests of market integrity," it said. The SFC initially wanted to suspend Denk's licence for nine months. After Denk made two representations, it reduced that to a public reprimand. Denk then appealed to the tribunal.