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French regulator fined Morgan Stanley $ 22 million
French regulators fined Morgan Stanley 20 million euros ($ 22 million) on charges that its London bond bureau used a pump and dump scheme to manipulate bond prices.
Tuesday Autorité des Marchés Financiers said the bank manipulated the prices of French and Belgian bonds in June 2015.
AMF reported that the fine is related to the manipulation of the price of 14 French government bonds (OAT) and 8 Belgian bonds (OLO) on June 16, 2015, as well as an OAT futures contract.
The AMF noted that a large sale of government bonds on June 16, 2015 disrupted the bond trading system of the French MTS Global Market, causing transactions to be suspended for four minutes and liquidity levels declining for about an hour..
Morgan Stanley said it intends to appeal.
«This activity was carried out in accordance with market practice and as part of the role of the firm and bonds as a market maker.», – the bank says.
AMF said that London-based Morgan Stanley International «aggressively bought» futures for French, German and Belgian bonds on Eurex, Deutsche Boerse derivatives exchange.
The regulator claims that Morgan Stanley artificially fixed prices of some bonds at abnormal levels, citing high selling volumes negotiated by traders and the fact that the bank’s big deal had the most positive impact on futures prices that day..
According to Bloomberg, AMF considers French and Belgian bonds to be fungible. The futures were used to raise the value of French bonds and, in turn, Belgian bonds, before the bureau dumped the last assets, investigators said..
AMF also said that according to Morgan Stanley, price fluctuations were "normal", considering the trading volumes and that it happened mainly due to exceptional circumstances on June 16, 2015.
The regulator also said that Morgan Stanley said the acquisition of French government debt futures was part of an attempt «liquidate a deficit position», and that the bank had no motivation to influence pricing.
Morgan Stanley is one of 15 primary dealers of French government bonds expected to provide liquidity to the secondary market for French Treasuries.