ABN Amro tech failure results in fine
ABN Amro has been fined for an erroneous sponsored access trade
Dutch bank ABN Amro has been fined by Nasdaq OMX Stockholm for a technology failure that led to an erroneous order entering the market.
The incident involved a sell order placed by the bank on behalf of a sponsored access client who wished to sell 5,000 SKF B shares, but accidentally entered a negative value (-5,000). Instead of returning an error, the bank trading software amplified the number of shares to be sold to 294.9 million and sent the order to the market. The sell order resulted in execution of 813,442 shares.
Under the exchange’s Nordic member rules, banks are liable for sponsored access orders. The rules also state that the member should establish appropriate technical and administrative arrangements to ensure that orders placed via sponsored access do not break the rules. ABN Amro was fined €36,000 for the incident.
The bank will not welcome the fine, which though small will be an embarrassment as it attempts to expand its business worldwide. Last month, the firm hired 11 new specialist staff as part of a drive to win business from high net worth individuals in Asia and the Middle East.
“As a clearing member of Nasdaq OMX, ABN AMRO Clearing Bank NV accepts responsibility for this incident which involved an erroneous order entry by one of our clients,” said the bank in an official statement. “We have since worked closely with both Nasdaq OMX, as well as other parties in the infrastructure chain, to ensure that this kind of client order issue cannot occur again. Market integrity and market risk mitigation are constant objectives for ABN AMRO Clearing Bank NV.”
The whole concept of sponsored access has been reformed in recent years, as concerns that so-called ‘naked’ sponsored access orders could destabilise markets have led to rule changes in several jurisdictions, including the US and much of Europe. The issue has also surfaced in Canada, where brokers will have to provide pre-trade risk controls for their sponsored access clients from 1 March this year.
