IMC’s trading business is growing rapidly down under. It has taken the zero sum game of derivative trading to a distinct higher level. The company has been buying derivatives from itself in six months in 2007. Agreed, at times it’s useful to mark the last traded price in your favour so it looks your big position is doing well. However, the exchange isn’t particularly happy with you trying to manipulate the market.
The exchange of Australia, ASX, has found evidence of IMC trading against itself for an astonishing number of 9705 times between February 1th and September 14th in 2007. Over nine thousand times of selftrading, that’s more than an occasional junior trader “defending” a position. Last month the exchange tribunal fined the company for $85.000.
All the trades occurred when an algo trading system traded actively against the market, including the market maker unit of IMC. For some reason this innocent explanation of IMC doesn’t sound like the whole story. Don’t exactly know which prices have been manipulated, but the high number of selftrading and the sudden stop in September suggest something else. The lawyers advised IMC not to contest the malpractice, which was apparently highly appreciated by the ASX tribunal. On the other hand, a $85k fine is small change for IMC but still a lot when it’s really a matter of innocent different systems doing occassional trades with other company units.
Anyway, ASX believes IMC Pacific didn’t do it on purpose and no investor got hurt during the party (right). Let’s fine them for $8,75 per selftrade. That will teach them. In the meantime, rival market maker Optiver in the Pacific earned the 35th place in the most wanted employers in Australia in Business Review Weekly last month.