France's financial watchdog, Autorité des Marchés Financiers, levied a €20 million fine against Morgan Stanley & Co International plc yesterday for price manipulation of French and Belgian government bonds.
According to the press release, on June 16, 2015, Morgan Stanley manipulated the prices of 14 French government bonds (OAT) and 8 Belgian bonds (OLO), as well as the price of one of the futures contracts.
The scheme was executed by traders at Morgan Stanley's European Government Bonds Desk. The traders made big buys of French (FOAT) and German (FGBL) sovereign bonds futures on German derivatives exchange Eurex, but several minutes later began selling 17 different French bonds, worth €815, on France's MTSand and BrokerTec trading platforms, as well as the €340 million in Belgian bonds on the MTS Belgium exchange.
An investigation by Autorité des Marchés Financiers found that Morgan Stanley's traders had locked in prices on the September 2015 French bonds futures contract, and 14 French and 8 Belgian bond contracts, at artificial and inflated levels.
The financial watchdog said the aim of the scheme was to influence the price of French and Belgian bonds via the futures contracts.
"The Committee considered that these acts also constituted price manipulation through the use of a form of deception or contrivance, since the FOAT acquisition was inconsistent with the overall strategy of the European Government Bonds Desk and had the effect of giving other participants a distorted picture of the state of the French sovereign bond market.," said the Autorité des Marchés Financiers.
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