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The Disciplinary Committee of NASDAQ OMX Stockholm fines Morgan Stanley

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The Disciplinary Committee of NASDAQ OMX Stockholm AB (“the Exchange”) has found that Morgan Stanley International Plc (”MSIP”) has contravened the Exchange’s Nordic Member Rules (“NMR”) and has therefore ordered them to pay a fine of four hundred thousand Swedish kronor (SEK 400,000).

The case pertains to an incident on November 30, 2011, immediately after market open, when MSIP rapidly submitted a large number of orders and executed a very large number of trades in a group of Stockholm listed shares. The affected order books incurred unusual volatility and during the period one intraday auction was triggered by one of the Exchange’s automatic volatility guards.

The trading pattern was immediately observed by the Exchange and it stood clear that an incident had occurred. When the Exchange attempted to contact the MSIP trader responsible for submitting the orders it was unable to do so. For these reasons the Committee held that MSIP has violated the NMR, which states that a member enabling client driven trading, so called Direct Market Access (DMA), shall use a trader ID that is designated for DMA and it shall appoint contact persons responsible for such ID and ensure that he or she can be contacted at any time during trading hours.

The trading behavior was a result of a MSIP client (the “client”) driven DMA trading. The client had made a coding error in its algorithm software that resulted in the unintentional trading activity. As part of that activity a great number of orders were submitted where the buyer and seller in the trades that followed was the same legal person. Such orders and trades cannot be considered as genuine. Hence MSIP violated the NMR where it is stated that all orders must constitute genuine orders and trades.

Moreover, whilst the Exchange acknowledges that MSIP's internal systems and controls enabled them to detect and independently terminate the trading, the incident itself shows that MSIP had not technical and administrative arrangements in order to hinder it from happening and causing market disturbance. MSIP has therefore violated the NMR also in this regard.

Accordingly, the Disciplinary Committee orders MSIP to pay a fine of four hundred thousand kronor (SEK 400,000).

The Disciplinary Committee’s ruling has been published on:

http://nasdaqomx.com/listingcenter/nordicmarket/surveillance/stockholm/disciplinarycommittee

About the Disciplinary Committee

The role of NASDAQ OMX Stockholm’s Disciplinary Committee is to consider suspicions regarding whether Exchange Members or listed companies have breached the rules and regulations applying on the Exchange. If NASDAQ OMX Stockholm suspects that a member or a listed company has acted in breach of NASDAQ OMX Stockholm’s rules and regulations, the matter is reported to the Disciplinary Committee. NASDAQ OMX Stockholm investigates the suspicions and pursues the matter and the Disciplinary Committee issues a ruling regarding possible sanctions. The sanctions possible for listed companies are a warning, a fine or delisting. The fines that may be imposed range from one to 15 annual fees. The sanctions possible for Exchange Members are a warning, a fine or debarment. Fines paid are not included in the Exchange’s business but are attributed to a foundation supporting research in the securities market. The Disciplinary Committee's Chairman and Deputy Chairman must be lawyers with experience of serving as judges. At least two of the other members of the Committee must have in-depth insight into the workings of the securities market.

Members: Former Supreme Court Justice Johan Munck (Chairman), Supreme Court Justice Marianne Lundius (Deputy Chairman), Professor emirita Madeleine Leijonhufvud, Company Director Stefan Erneholm and Company Director Anders Oscarsson. Deputies: Former Authorized Public Accountant Bo Magnusson, Lawyer Wilhelm Lüning, Company Director Jack Junel, Ragnar Boman (MBA) and Carl Johan Högbom (MBA).

  

Media contact:

Carl Norell

NASDAQ OMX Corporate Communications

+46 8 405 66 39

carl.norell@nasdaqomx.com

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