SFC fines BNP HK$15 million for dark pool failures
Firm failed to execute orders based on price priority or keep appropriate trading records
The Securities and Futures Commission yesterday fined French financial institution BNP Paribas Securities (Asia) HK$15 million for lapses in conducting its dark pool trading services.
An SFC investigation found the firm's dark pool trading services, known as the BNP Internal Exchange (BIX), failed to operate in the period between November 2009 and April 2011 in the way it had informed its clients.
No one should dive into dark water without knowing what is hidden
Dark pools are off-exchange electronic trading systems that match buy and sell orders without disclosing the identity of the parties, prices or volumes.
"No one should dive into dark water without knowing what is hidden," said Mark Steward, executive director of the SFC.
Steward said all such operators "must have clear rules and procedures in place for operating dark pools and they should operate consistently with representations to clients whose consent to enter the dark pool is clear and well-informed".
The regulator said BNP Paribas Securities Asia had informed its clients that trades via BIX would be executed in accordance with order price priority so that a buy order with higher price would have priority over a buy order with a lower price.
BIX failed to give priority to higher-priced orders and treated all orders as having equal priority with allocations on a pro rata basis between November 2009 and April 2011," the SFC said.