Decision by Nasdaq Stockholm’s Disciplinary Comm

The Disciplinary Committee of Nasdaq Stockholm AB has found that Morgan Stanley & Co. International Plc (“Morgan Stanley”) has breached the Nasdaq Nordic Member Rules (the “NMR”) and has therefore issued a warning to Morgan Stanley.

Morgan Stanley incurred losses in February 2017 through two transactions in two certificates due to technical problems in its systems. Morgan Stanley was aware that its counterparty in the two transactions held long positions in the instruments, and when Morgan Stanley temporarily requested “Sold-Out-Buy-Back” status (“SOBB”) [1] for the instruments, the counterparty’s only way of exiting its positions in the certificates was to sell them back to Morgan Stanley at a price determined by the Morgan Stanley itself.

The prices for the two certificates during the period subsequent to the enforcement of the SOBB status were markedly lower than in preceding periods when normal trading conditions were in effect. No changes in the price of the underlying assets or other relevant factors could explain this. For its own part, Morgan Stanley has stated that the changed pricing was due to the technical problems experienced by the Morgan Stanley.

According to the Disciplinary Committee, Morgan Stanley has not been able to demonstrate that the reduction in the prices could be considered to reflect prevailing market values, and the Disciplinary Committee concluded that Morgan Stanley’s actions constituted a serious breach of items 4.6.1 and 4.6.2 of the NMR. The Committee also concluded that there were shortcomings in the communication from Nasdaq Stockholm, and hence, despite the severity of the breaches, the sanction was limited to a warning. 

A more detailed description of the matter and the Disciplinary Committee’s decision are available at: http://www.nasdaqomx.com/listing/europe/surve...decisions/

Please see the attached documents for Swedish and English versions of the decision.

For further information about this exchange notice please contact Issuer Surveillance, telephone +46 8 405 60 00, or iss@nasdaq.com .

[1] Sold-Out-Buy-Back is a tool intended to be used by liquidity providers when the volumes of the issued financial instruments of an issuer are depleted. The issuer must contact Nasdaq Stockholm to use the function and request that the order book is assigned SOBB status. The order book is then flushed and a note code is issued to the market.