A major deal passed through DNB Markets five days before the announcement was made and the stock rose sharply. Avoid trading brokerage control systems.
The Norwegian Financial Supervision Authority investigated how DNB Markets complied with market surveillance and reporting requirements.
In a supervisory report dated December 15 of this year, a weakness in the system used by Norway’s largest brokerage firm to monitor the market was noted.
The vulnerability may have meant that suspicious orders and transactions were not caught and reported, according to the authority.
Here, a special case illustrating vulnerability is indicated.
The main trade went through DNB Markets. Five days later, a message was posted which, according to the report, led to a “significant price increase” in the relevant stock.
No alarms have been raised about the possibility of insider trading.
Thus, trade is not checked either.
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“dark gatherings”
Why didn’t the alarms go off?
In the examination report, it appears that the trade in question was divided between different trading places.
The trade took place in part in what is called “dark poolsdark poolsA private market for the trading of stocks and other securities that are not publicly available to investors. The name refers to a complete lack of transparency, according to Investopedia’, and was not caught by the brokerage house’s market monitoring systems.
Only a small part, more specifically 0.6 percent, of the total order was traded in Oslo Bors.
It was not enough to sound the alarms that must sound in such cases when shares are traded through the stock exchange.
The supervision report states that DNB Markets agrees that the trade in question should have raised an alarm in the monitoring system and forms the basis for further analysis.
More details about the trade are unknown, including the exact size of the price hike. Neither DNB nor Finanstilsynet inform direct questions about which company is being referred to, exactly how large the transaction was and when the incident occurred.
DNB-Markets: agrees with the supervisory authority
According to DNB Markets, split orders are common. However, the inspectorate warns that the system may risk not capturing such split orders in different trading venues.
DNB Markets has started cooperating with the system supplier to monitor the market. The new solution will move transactions made outside the member markets into the system. Thus, these will also form part of the basis for electronic monitoring, according to the authority.
Alexander Obstad, Head of DNB Markets, confirmed that Finanstilsynet has implemented objective market monitoring supervision at the brokerage house.
In its final report, he says, the inspectorate pointed out some weaknesses.
“We agree with the points raised by Finanstilsynet and have already taken measures to address these points, including entering into an expanded agreement with our monitoring system supplier,” Opstad says in a statement emailed to E24.
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