SFC Reprimands, Fines Interactive Brokers Hong Kong

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.‎

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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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