South Korea’s stock exchange authority Korea Exchange (KRX) slapped a fine of 175 million won ($148,242) on U.S. brokerage Bank of America Merrill Lynch for violating domestic rules and distorting market through algorithmic high-frequency spoofing.

Merrill Lynch has been accused of abetting 6,200 spoofing activities while handling 80 trillion won worth deals commissioned by American hedge fund Citadel Securities from October 2017 to May 2018. Over the period, Citadel was found to have profiteered about 220 billion won, according to KRX.

Spoofing is an algorithm-based trading scheme where a trader places large volumes of orders and quickly cancels them with an aim to manipulate prices. The activity is banned in the local market because it seriously hinders market orders.

According to a probe conducted by a market monitoring committee of KRX, Citadel allegedly made large buy orders with no intention of executing to attract demand from retail investors by using an arrangement called “direct market access” (DMA).

DMA is an arrangement that allows non-members of exchange to submit orders directly to the order book in order to expedite order execution.

By Chung Seung-hwan and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]