Interactive Brokers fined in the amount of 4,5 million dollars and 1,5 million

The Hong Kong Securities and Exchange Commission (SFC) decided to impose a financial penalty on Interactive Brokers Hong Kong Limited (IB HK) for 4,5 million. This is a consequence of the breach by the broker of the code of conduct in the execution of market orders using the so-called algorithmic transaction systems. But this is not the end of bad news. Just two weeks earlier, the British FCA punished Interactive Brokers UK for the amount of 1,5 million.

4,5 million from SFC

The case concerns the situation of 2015 and 2016 years. It was at that time that the two Hong Kong companies recorded spectacular increases without any fundamental premises at the Hong Kong Stock Exchange. The first of these was O-Net Communications Limited (increase by 48,7%) and the second one by AAG Energy Holdings Limited (increase by 126%). It took less than two minutes to get the courses up the algorithms.

The SFC regulator and IB HK jointly decided to appoint an independent expert to assess the operation of the broker's trading systems. Particular attention was to be paid to the scope of control of the transfer of orders to the market, which could have a negative impact on its operation. The results of the expert opinion were unambiguous - IB HK transferred orders to the market by placing the entire volume, without taking into account the liquidity of the orders. Additionally, he did not adequately control the entire order submission procedure.

The company announced that during the next months 12 will take steps to ensure compliance of orders with the requirements set by the SFC regulator.

1,5 million from FCA

On January 25, the British Financial Conduct Authority (FCA) announced the imposition of a fine on Interactive Brokers UK (IB UK) in the amount of $ 1,5 million. And this time it is about irregularities in the field of transaction systems and reporting of suspicious transactions, which is related to the violation of the FCA license agreement.

This time the situation applies to 2014 and 2015. It was then that IB UK used another entity belonging to its capital group for post-transaction monitoring, but in the USA. In addition, the company was not able to effectively catch the so-called potential abuse that could be allowed by its clients. It also reflected the lack of an adequate level of communication with the team in the USA in the preparation of transaction reports.

This, in turn, increased the risk of not submitting applications by IB UK about suspicious transactions to the FCA. The British regulator during the inspection found that there were at least three cases when the need arose, and no actions were taken informing about suspicious activities by the broker's clients.

Mark Steward, one of the executives of FCA for enforcement:

"Brokerage houses and investment companies not only have an obligation to report suspicious activities on financial markets, but at the same time ensure that derivatives exchange systems are not used for criminal purposes. IBUK's activities in this area were incomplete, ineffective and did not meet our standards. "

About Interactive Brokers

Interactive Brokers is one of the largest brokers in the world that offers access to a wide range of markets - from stocks from almost all over the world, through futures, to spot trading on the Forex market. On February 23, 2017, Interactive Brokers UK Limited, based in London, was admitted to operate on the Warsaw Stock Exchange in the field of trading in securities and derivative instruments for the client's account.