ASIC is tightening its focus on suspicious activity in Australia’s Fixed Income, Currencies, and Commodities (FICC) markets. In just over a year, the regulator has imposed penalties on three major institutions for failing to recognise orders placed with the intention of creating a false or misleading appearance. These actions reinforce ASIC’s expectations around suspicious activity reporting and highlight the complex surveillance challenges posed by certain FICC markets.
For firms trading in Australia, these cases should serve not only as a compliance signal but also as an invitation to reassess whether surveillance frameworks are truly fit for purpose in fast-evolving and often illiquid FICC environments.
Why FICC Markets Demand Special Attention
FICC markets present distinct structural and operational challenges. Unlike highly liquid equity markets, many FICC instruments, such as electricity futures or agricultural derivatives, trade thinly and settle using formulaic price mechanisms. These characteristics create opportunities for manipulative behaviour that can be both subtle and impactful.
ASIC’s recent enforcement actions demonstrate a clear concern with:
These are not abstract concerns. In recent cases, ASIC found that suspicious trades had a material impact on benchmark pricing, margin calculations, and, ultimately, market integrity.
Three Cases, One Pattern: Vulnerable Markets, Missed Signals
While gatekeeper responsibility remains a consistent theme across ASIC’s enforcement actions, it is the nature of the underlying FICC markets that has often enabled or obscured problematic trading behaviour.
1. Major Australian Bank: The Challenges of Electricity Futures
In 2024, ASIC’s Markets Disciplinary Panel (MDP) fined a major Australian bank AUD $4.995 million after its DMA clients placed suspicious orders in the Australian electricity futures market. These trades occurred moments before the daily settlement price (DSP) was calculated, a price derived from a two-minute volume-weighted average and final unexecuted order prices.
Because electricity is non-storable and regionally constrained, its futures market is highly volatile and often illiquid. A misconfigured surveillance parameter meant the bank’s controls simply missed the activity. ASIC took issue with both the intent of the trades, as well as the failure to detect and escalate activity in a market uniquely susceptible to manipulation.
2. Tier 1 US Investment Bank: Illiquidity and Influence in Wheat Futures
In another case, a tier 1 US investment bank’s DMA client, a major agribusiness, accounted for nearly 100% of trading volume on certain days in the Australian wheat futures market. The client’s trades were concentrated at the close and appeared to be aimed at influencing the DSP to reduce margin requirements.
Here too, the regulator’s concern centred on the structural features of the market: thin trading, physical delivery, and benchmark sensitivity. ASIC found that the bank’s surveillance processes failed to adapt to these dynamics, leaving potentially manipulative patterns unflagged.
3. Tier 1 European Investment Bank: Gatekeeping Failures in Electricity and Wheat Futures
Most recently, ASIC’s MDP fined a European investment bank AUD $3.88 million after finding the bank failed its gatekeeping obligations in the Australian electricity and wheat futures market. According to the MDP, the bank did not have adequate systems and controls in place to detect or prevent suspicious orders placed by a DMA client, which were alleged to create a false or misleading appearance in the market.
Similarly to the two cases above, the misconduct centred on trading near the market close in an illiquid commodity futures contract, where even small trades can disproportionately influence the settlement price. The penalty, one of the largest to date in this series of actions, highlights ASIC’s increasing willingness to sanction firms that fall short in monitoring client behaviour in FICC-linked products.
This trend suggests ASIC’s focus is not only on who is responsible but also on where manipulation is most likely to occur.
Surveillance Takeaways: Practical Lessons for Users of FICC Markets
Whether you’re facilitating agency or proprietary trading in FICC markets, these cases underscore some key lessons:
Aligning with ASIC’s Expectations on SARs
In Information Sheet 265, ASIC outlines the behaviours it expects intermediaries to report in FICC markets. These include:
Timeliness is crucial. ASIC emphasises that SARs should be submitted without delay. Firms are encouraged to report early, not after they investigate or confirm wrongdoing.
Final Thoughts: From Reactive to Proactive
As ASIC’s enforcement actions show, the burden of surveillance in FICC markets is increasing, and rightly so. These markets underpin key economic sectors, from agriculture and energy to sovereign debt and FX. Their integrity matters.
Firms need to recognise that vulnerabilities in these markets, illiquidity, benchmark reliance, and complex settlement dynamics, require more than off-the-shelf legacy rules-based surveillance solutions. They demand sophisticated surveillance solutions with tailored controls, and fast, confident decision-making.
Now is the time to move from compliance checklists to risk-led frameworks. Because in Australia’s FICC markets, surveillance excellence isn’t just regulatory, it’s foundational to fair, functioning markets.
