Four RBC derivatives staff fined C$312,000 over wash trading

Canadian regulators have fined four senior employees of RBC Dominion Securities a total of C$312,000 ($250,000) for 'wash trading' in shares of RBC and Bank of Montreal.

The four men were Ian Macdonald, managing director of Canadian equity derivatives; David Singh, director of Canadian equity derivatives; Edward Boyd, vice-president of Canadian equity derivatives; and Peter Dennis, a senior equity and derivatives trader.

The Market Regulation Services (RS) panel decided that the four "did not engage in a pattern of manipulative or deceptive conduct [and] admitted their error to RS on being contacted".

According to the RS summary, on August 11 last year RBC and another unnamed bank agreed a hedging transaction involving shares in Bank of Montreal and RBC. The agreements allowed RBC to place buy orders for Bank of Montreal shares and sell orders for RBC, while the other bank would place the corresponding sell and buy orders. The trades were to be completed using the Toronto Stock Exchange's market-on-close facility.

However, the deal went wrong when a dealer at the other bank failed to enter his orders correctly, leaving RBC exposed. They then decided to rectify this by entering the offsetting orders themselves, producing 'wash' trades - trades which result in no change of ownership.

RS acknowledged the initial error was not theirs and that the four were acting under time pressure - their key mistake was not to contact regulators as soon as they realised the situation, RS said.

RBC was also ordered to pay C$231,500 compensation to those affected by the wash trades.

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