SFC fines BNP Paribas Securities (Asia) Limited $15 million for dark liquidity pool-related failures

3 Aug 2015



The Securities and Futures Commission (SFC) has fined BNP Paribas Securities (Asia) Limited (BNPP Securities Asia) $15 million for failures in relation to its dark liquidity pool trading services (Note 1).

The disciplinary action follows an SFC investigation into BNPP Securities Asia’s dark liquidity pool trading services, known as the BNP Internal Exchange (BIX). The SFC found that:

Mr Mark Steward, the SFC’s Executive Director of Enforcement, said “No one should dive into dark water without knowing what is hidden. Operators must have clear rules and procedures in place for operating dark pools, and equally important, they should operate consistently with representations to clients whose consent to enter the dark pool is clear and well-informed.”

In determining this disciplinary action, the SFC took into account that:

End

Notes:

  1. BNPP Securities Asia is licensed under the Securities and Futures Ordinance (SFO) to carry on business in Type 1 (dealing in securities), Type 2 (dealing in futures contracts), Type 4 (advising on securities), Type 6 (advising on corporate finance), and Type 7 (providing automated trading services) regulated activities.
  2. As a licensed corporation, BNPP Securities Asia has to exercise due skill, care and diligence in conducting its business in regulated activities and to act in the best interests of its clients under the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct).  (See also Note 5)
  3. Among the licensing conditions imposed on BNPP Securities Asia’s Type 7 regulated activities, BNPP Securities Asia was required to notify the SFC of any incident of material service breakdown or disruption of the operations of BIX affecting its users.
  4. Section 4 of the Securities and Futures (Licensing and Registration)(Information) Rules provides that a licensed corporation shall give notice in writing to the SFC where there is a significant change in its business plan provided to the SFC under Part V of the SFO within seven business days after the change. According to General Principle 7 and paragraph 12.1 of the Code of Conduct, BNPP Securities Asia was required to comply with all applicable laws and regulations.
  5. As a result, the SFC is unable to calculate the exact number and extent to which BIX auctions were affected.
  6. The enhanced regulatory regime on alternative liquidity pools will come into force on 1 December 2015.

A copy of the Statement of Disciplinary Action is available on the SFC website



Page last updated : 3 Aug 2015