Ex-Deutsche Securities trader wins appeal against SFC
Tribunal rules against move to punish dealer over sharp fall in HSBC share price in 2009
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.