Swedish FSA sends big fine to Nasdaq for role in botched power trade

Nasdaq Clearing gets a huge fine from Sweden's financial supervisory authority for the exchange's deficient role in handling a catastrophic energy trade from 2018.


The Swedish financial supervisory authority, Finansinspektionen (FI), reports having issued an administrative fine worth no less than SEK 300 million (EUR 29.7 million), FI informs in a statement Wednesday morning.

FI says the fine is levied due to Nasdaq Clearing's "serious deficiencies" in operations that occurred in an energy market incident during 2018.

This took place in connection with major Norwegian speculator Einar Aas, at the time one of Norway's wealthiest persons, who made a faulty bet on the differential between Nordic and German power prices. Aas' position was based on an expected price convergence, but the opposite thing happened instead.

The bet was so massive that the trader's collateral proved inadequate. The move ended with Nasdaq Clearing forcibly selling positions and withdrawing capital from the default fund containing the contributions of all clearing members, meaning, for instance, utilities, trading firms etc., resulting in an immediate loss of EUR 114 million.

The Swedish FSA lists several points of criticism in the statement, including the insufficiency of requirements set by Nasdaq Clearing for its members' financial and operational capacity.

"The [regulatory, -ed.] breaches also resulted in unacceptable risks in Nasdaq Clearing's operations, which could have had a very serious impact on the financial system," FI writes and adds that Nasdaq Clearing has since implemented measures "to rectify these deficiencies" and thereby deems it appropriate to fine the exchange SEK 300 million.

In an email sent to AMWatch's sister media, FinansWatch, Nasdaq European Markets Director of Communications David Augustsson writes that the company has worked to improve its procedures in the area after the incident in 2018.

"Nasdaq Clearing will now throughly analyze the decision [from FI,-ed.] and will therefore assess possible steps thereafter," Augustsson writes.

English Edit: Daniel Frank Christensen

(This article was provided by our sister media, FinansWatch)

(Note: Augustsson citation translated from Danish)

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