Disciplinary fine of EUR 40,000 for HSBC for violating trade reporting obligations

The Disciplinary Committee of the OMX Nordic Exchange Helsinki has issued HSBC Bank plc with a disciplinary fine of EUR 40,000 for breaching the rules on trade reporting.

The OMX Nordic Exchange Helsinki (formerly the Helsinki Stock Exchange) was informed on May 15, 2007, that HSBC had not fulfilled its reporting obligations concerning an exceptionally large number of trades and shares of listed companies on the OMX Nordic Exchange Helsinki.

HSBC had delivered a list of unreported transactions belonging to OMX Nordic Exchange in Copenhagen, Stockholm and Helsinki. Since the main part of these failures in reporting regarded the OMX Nordic Exchange Helsinki, the disciplinary case was handled by the OMX Nordic Exchange Helsinki.
Statement
HSBC admitted the breach of rules but stated that there was no intention to improperly influence the price structure. The failure in reporting occurred due to several factors, including human errors. HSBC has taken measures to prevent such breaches happening in the future.

Disciplinary Committee consideration
HSBC had informed the OMX Nordic Exchange Helsinki that it had failed to report manual trades on the Nordic Exchange in Helsinki, Stockholm and Copenhagen for a period of several months. Unreported trades consisted of considerable trading volumes exceeding in many cases ten times the daily volume in the order book. The information concerning these trades was, as such, not available in a timely manner to market participants, to investors or the trading surveillance of exchanges.

The main rule on reporting time states that manual trades must be reported immediately, however, no later than five minutes from the time of the trade. This rule promotes market transparency, providing market participants, investors and market surveillance with essential information.

The Disciplinary Committee views transaction reporting as one of the central means of creating transparency in trading. Investors are entitled to expect that all reportable trades are reported by the members according to the valid rules. Further, following rules on transaction reporting ensures a level playing field for all market participants.

The Disciplinary Committee states that there was no indication that the breaches had the purpose of influencing the price structure. Despite this, it is the conclusion of the Committee that the breaches were severe due to the volumes of unreported trades and the systematic nature of failing to report them. The Committee considered that HSBC had seriously breached Norex Member Rule 5.6.1 by not reporting manual trades in time.

When considering a sanction it was taken into account that HSBC had been proactive in providing the exchanges with information on the unreported trades. HSBC has also described how its reporting processes will be enhanced in order to prevent future failures. On the other hand, the Disciplinary Committee also took into consideration that OMX Nordic Exchange Stockholm had already in 2006 issued a written criticism to HSBC for failed trade reporting in connection to similar events.
Decision
The Disciplinary Committee issues HSBC Bank Plc with a warning and orders HSBC Bank plc to pay a fine to OMX Nordic Exchange Helsinki of an amount corresponding to EUR 40,000.

For further information, please contact:
Timo Rintanen, Secretary of the Disciplinary Committee +358 9 6166 7640
Janne Seppänen, Head of Surveillance Helsinki +358 9 6166 7382


OMX Nordic Exchange Helsinki donates its disciplinary fines to a foundation that sponsors research related to securities markets in Finland and Sweden.

Further information about the Disciplinary Committee and its members, as well as the regulations of the Disciplinary Committee, are available on the OMX Nordic Exchange website at www.omxgroup.com/nordicexchange.

Surveillance of the OMX Nordic Exchange Helsinki
The surveillance unit of OMX Nordic Exchange Helsinki investigates all suspected breaches of regulations. Minor breaches will result in written criticism of the company, whereas more serious cases are referred to the Disciplinary Committee.
The members of the Disciplinary Committee are legal and financial experts independent of OMX Nordic Exchange Helsinki. The Chairman of the Committee is Mr. Mikko Tulokas, Supreme Court Justice, and the members are Professor Risto Nuolimaa, Professor Kalervo Virtanen and Mr. Simo-Pekka Helander LL.M.