Merrill Lynch's Seoul branch, which posted a profit on the market through high-frequency trading, was slapped with a 175 million won fine by the Korea Exchange.
On July 16, the Korea Exchange's market watchdog decided to impose 175 million won in membership sanctions on Merrill Lynch. As for executives and employees of Merrill Lynch, the company will notify the market watchdog after taking a voluntary action.
According to the exchange, Merrill Lynch committed a total of 6,220 faked orders worth 9 million shares for 84.7 billion won, in 430 items on behalf of the C company between October 2017 and May 2018 in violation of the 3rd clause of the Article 4 of the Market Monitoring Regulations.
During the period, it received about 80 trillion won worth of transactions from C, and C is estimated to have generated about 220 billion won worth of profit from the sale, the exchange estimated.
"The C's faked orders were made very widely throughout the market through algorithm transactions using direct market access (DMA)," the exchange said.
On Nov. 20, 2017, the exchange warned Merrill Lynch of its supervision regarding the consignment of the consignor's faked orders, and made another notification on May 29, 2018, but Merrill Lynch continued to accept the company's orders.
The exchange began to supervise the orders and trade behaviors of the consignor's accounts for three months from June to September 2018, and in October of the same year, it visited the Seoul branch of Merrill Lynch directly to conduct the inspection.