ERCOT power market fine on ICE - with attached "failure to supervise" - for a major bank subsidiary for disruptive trading
Today The ICE issued a disciplinary notice to Macquarie Energy LLC regarding orders entered in the ERCOT North 345 KV Real Time Off Peak contract that "made it seem to other market participants that an advantageous buying opportunity was available in the Peak Future". The interesting point is that the individual - referred to as "former employee" - " initiated this conduct after he unknowingly fell victim to the same circumstances he then caused to occur. The problem was that there was a chance to misunderstand high off peak offers as attractive on peak offers. It would infer that the trader had bought off peak at a high price by misreading the offer. The former employee intended to prove the point that he was dissatisfied with the price adjustment provided by ICE Operations in accordance with the Exchange’s Error Policy after executing a series of trades in a wrong market." This means that the trader felt there was a structure that would cause market participants to misunderstand their risk
Macquarie was also hit for failure to supervise as, while they had compliance and surveillance in place that oversaw this individual , they may not have had oversight adequate to assure the individual was acting in accordance with exchange rules. The total fine was $250,000. The total notice is here
This is an interesting case because the notice reads that the employee entered the orders in knowingly and with the intent that other traders would make the same mistake he made. It also reads that the trader was trying to make a point that directly to The ICE by way of other traders - and potentially to make other traders also angry at The ICE> If nothing else, if the trader felt he suffered harm from The ICE's error policy, then he was acting to have other participants also incur that harm.
This points out three things:
The corresponding trader disciplinary notice is here. The description is mostly the same but does indicate "As a result, in some instances, Alexander caused participants to believe they were transacting in the Peak Future, when in reality, they transacted in the Off-Peak Future, and subsequently to report the trades as an error, which resulted in significant price adjustments from the price at which they originally traded." This specifically points out the disruptive nature of the activiities.
The trader was fined $85K and suspended from the exchange for 9 months.