ASX on watch for market manipulation

The ASX’s surveillance team warns the market operator is keeping an eye out for unexplained price moves and companies who fail to disclose information.

It doesn’t take much for the Australian Securities Exchange to take notice of share price aberrations, with the market operator’s system firing off constant alerts as it seeks to crack down on cases of market manipulation and insider trading.

The automated monitoring systems which sit behind the ASX allow the market operator to maintain vigilance over the more than 2010 listed companies. But the ASX is also watching some companies more closely than others.

Its compliance team has a tightly held list of frequent flyers subject to enhanced surveillance amid concerns shareholders or company figures may seek to misuse the market for their benefit.

ASX market operations general manager Ben Jackson said sophisticated systems were used to monitor movements in share prices and volumes over short and long time frames to determine if there have been attempts to manipulate the market or trade with inside information.

When alerts fire, the ASX steps into action, often slapping companies with what is known as a “speeding ticket”, or a query notice.

Mr Jackson said the ASX could see the list of brokers and traders on companies and often provided this to the Australian Securities & Investments Commission if the market operator had deeper concerns about trading misbehaviour.

He said the ASX did not prioritise situations by market capitalisation, instead dealing with each instance on a case-by-case basis.

But he said the ASX had spent time finetuning its alerts platform to notify it when there were “potentially obvious” cases, but avoided winding the system so tight as to swamp the market operator with potential red flags.

Market supervision is the responsibility of the ASIC, after the powers were handed to the corporate regulator in 2010.

ASX market operations general manager Ben Jackson.

This saw ASIC put in place market integrity rules based on the existing systems at the ASX, SFE, NSX and BSX.

ASIC pulled up almost 24 people from the ASX under the move.

Mr Jackson said the relationship between the ASX and ASIC was “really strong”.

“My surveillance team talks to ASIC every day,” he said.

“That can be on a number of matters, it’s not by design but it’s worked out quite well.”

The ASX uses market surveillance platforms supplied by the Nasdaq, while ASIC uses different systems to monitor trades and market movements.

Mr Jackson said not only did the ASX monitor market movements, but also kept an eye on ­social media and market forums to see who might be sharing sensitive information.

The ASX doesn’t have thresholds of market-sensitive information, but Mr Jackson noted there was “a bit of science” which guided the market operator in where to press issues with listed companies.

“If we need to quickly halt a stock or ask questions to a company, because of perhaps a suspected pump and dump or something else, my surveillance team will reach out,” he said.

ASX head of listings compliance James Gerraty said the ASX had a shortlist of companies under enhanced surveillance.

This sometimes resulted in the ASX putting a halt in place or a trading pause after these companies post announcements, or intervening before updates were distributed to the market.

Listed battery and graphite player Magnis Energy Technologies is one company on the ASX’s list, with the market operator frequently skirmishing with the Sydney-based energy company.

Listed uranium explorer Gladiator Resources also received two ASX Aware Queries last week. The ASX was first to question Gladiator Resources, which boasts uranium deposits in the African nation of Tanzania, over an unexplained jump in its share price, followed by a market update.

ASX head of listings compliance James Gerraty

This came after shares in Gladiator lifted from 1.8c on January 5 to an intraday high of 3c on January 8 amid a significant increase in the volume of traded securities in the miner.

Gladiator was asked to reveal if any market-sensitive information had not yet been revealed to the market, with the company’s secretary, Andrew Metcalfe, saying the only update relevant to the market had been a survey result posted on December 27.

Two days later, Gladiator revealed grading samples to investors after a reanalysis of its December 27 results, which revealed a significantly higher concentration of uranium than previously disclosed.

This triggered another ASX Aware Query demanding to know why Gladiator had not disclosed the information earlier and whether this had allowed investors to trade ahead of the market. But Gladiator told the ASX the results had only been revealed to it on January 8 at about 6.24pm, with the company only finalising a draft announcement on January 9, before its release to the market on January 10.

Mr Gerraty said the ASX reviewed responses to its queries, but noted the market operator only had the power to suspend or refer matters to ASIC.

But he said ASIC and the ASX worked together to follow through matters, particularly when there were concerns about responses given to queries.