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Pressure builds on ASX to reverse hoax trades

Date

Peter Ker, Mark Hawthorne

The ASX is standing firm over Whitehaven.

The ASX is standing firm over Whitehaven.

TRADERS who lost money in this week's $314 million market manipulation should have their money returned, according to a corporate law expert who previously served as the stock exchange's manager of legal services.

The comments from Tony de Govrik, who spent eight years at the Australian Securities Exchange until 1993, came as investigations continue into the hoax press release that rocked Whitehaven Coal shares on Monday.

Mr de Govrik, now legal affairs director for the Australian Corporate Lawyers Association, said his former employer should soften its refusal to reverse the trades made during Monday's period of confusion.

''In fairness to the people who were trading on something that was clearly an orchestrated hoax and who have been disadvantaged, the ASX ought to consider reversing those trades,'' he said. ''You've got to ask the question - when it's now clear that people traded on an uninformed market - why the ASX wouldn't assist the people who have been disadvantaged by reversing the trades.''

Whitehaven shares fell nearly 9 per cent around midday on Monday after environmental activist Jonathan Moylan fooled some traders and media into thinking the company had been stripped of a $1.2 billion loan promised by ANZ Bank.

The ASX has stood firm behind its ''trade cancellation rules'', which say that a stock price must move by 10 per cent or more within three minutes to warrant a cancellation of trades made under illegitimate circumstances.

An ASX spokeswoman confirmed that the Whitehaven incident did not meet the criteria.

She said Monday's trading in Whitehaven was ''within ASX's prescribed no-cancellation range. Subsequently, ASX has received no requests for cancellation from ASX market participants.''

Despite a lack of formal requests, market participants have privately expressed a firm belief that trades made during the Whitehaven hoax should be cancelled.

A Melbourne stockbroker said: ''Here we have an open-and-shut case of a hoax that has adversely impacted a significant listed company … if there was ever a case of an ill-informed market in operation, then this is it. If we're not going to even consider reversing trades after the Whitehaven hoax, then when are we?''

Mr de Govrik said the market operator needed to be more flexible and deal with matters on their merit.

''ASX should be able to exercise some discretion under its rather rigid operating rules to cancel trades in extreme circumstances such as these,'' he said.

''If I was a seller I would be a bit concerned, especially if I sold near the bottom of the market on the day,'' added.

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