The Norwegian markets regulator has censured Nasdaq’s commodities exchange in Oslo for supervisory failures after a trader blew a €114m hole in the stability fund that ensures the safety of derivatives trading last year.
The business failed to adequately monitor its trading members or the traders’ positions limit the regulator had set, a report on Thursday from Finanstilsynet, the Norwegian financial supervisory authority, said.
Authorities have been investigating the market dislocation last September when Einar Aas, one of Norway’s best known power markets traders, was unable to maintain his positions in the German and Nordic power markets after prices went sharply against him.
His outsized positions blew through several of the layers of protection at Nasdaq’s clearing house in Sweden, which is designed to insulate the market from a default.
But Finanstilsynet said the Norwegian arm had relied too much on sharing resources within the wider Nasdaq group, while some controls were not in compliance with requirements set out in Mifid II.
It “censures the company for depending too heavily on the monitoring carried out by Nasdaq Clearing, whose objective differs from that of the company,” Finanstilsynet said.
Furthermore Nasdaq’s investigations into the incident had been “inadequate” and the watchdog criticised Nasdaq “for not telling its supervisory authority on its own initiative.”
The Norwegian regulator also discovered that unidentified deputies for Mr Aas had entered into trades on the exchange via Mr Aas’s membership.
Nasdaq said it had received the report. “We are currently reviewing it in detail to address any concerns. We continue to communicate and work with regulators, our members and other stakeholders in order to further enhance our exchange and commodities business,” it said in a statement.
