Hong Kong’s Securities and Futures Commission (SFC) on Wednesday fined Interactive Brokers Hong Kong Limited, the arm of US brokerage Interactive Brokers (IB), HK
$4.5 million for internal control failures between 2015 and 2016.
The commission also reprimanded the company for failing to have adequate internal controls in place to prevent its execution of market orders from disrupting the market, and for a lack of documentation for its electronic trading systems.
In the investigation, the SFC found irregular price movement of two stocks, which shot higher by 48.7 percent and 126 percent in less than two minutes. The SFC and IBHK jointly hired an independent reviewer who discovered the company’s dealers caused the price spikes after they placed the entire orders volume to the market and “repeatedly submitting the unexecuted part of the order at the next available price until the entire order was completed.”
Other internal control failures included non-observance of liquidity conditions when executing the market orders. Interactive Brokers also failed to comply with position limits on its derivatives trading and to follow the instruction to prevent its execution of orders from disrupting the market.
In reaching its decision, the SFC said Interactive Brokers had been co-operative during its investigation. Furthermore, the company agreed to engage an independent reviewer to conduct a forward-looking review of its internal controls to ensure compliance with the relevant regulatory requirements.
“Interactive Brokers Hong Kong has no disciplinary record in respect of the present failures,” the regulator said in its statement.
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