LSE fines stockbroker for allowing market rigging

LONDON - The London Stock Exchange (LSE) has fined an unspecified stockbroking company £35,000 for allowing a client to rig the market through 'layering' its electronic orderbook. The Financial Services Authority is also reportedly investigating the same client, understood to be a large institutional investor, for market abuse.

The London Stock Exchange issued the penalty under its mandate to fine firms up to a level of £50,000 for lacking adequate systems and controls.

The offence was allegedly committed in October 2008, despite several warnings from the London Stock Exchange between October 2007 and January 2008.

Layering, once common when the electronic order book was introduced, has been largely eradicated in recent years, and involves a client with direct access to the order book putting in multiple buy and sell orders to synthesise market liquidity, with the aim of then selling at an inflated price or buying at a deflated price.