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France's AMF fines Morgan Stanley unit €20M for sovereign bonds manipulation

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France's AMF fines Morgan Stanley unit €20M for sovereign bonds manipulation

French markets regulator Autorité des marchés financiers, or AMF, penalized U.K.-based Morgan Stanley & Co. International PLC €20 million for manipulating the price of 14 French government bonds and eight Belgian bonds, as well as the prices of French sovereign bonds futures contracts, according to a Dec. 10 release.

Parent company Morgan Stanley said it is disappointed with the finding and intends to lodge an appeal.

"The activities in question were undertaken in accordance with market practice," it said in a statement.

AMF said that the European government bonds desk at Morgan Stanley & Co. International purchased a substantial number of French and German sovereign bonds futures contracts and Buxl futures contracts on the German derivatives regulated market on June 16, 2015. Shortly afterwards, the traders sold 17 different French government bonds for €815 million, with the transactions mainly taking place on the MTS France and BrokerTec electronic trading platforms. They also offloaded eight Belgian bonds for €340 million on the MTS Belgium platform.

The regulator's enforcement committee found that the company secured the price of the September 2015 French sovereign bonds futures contracts that traded on Eurex as well as the price of 14 French government bonds and eight Belgian bonds at an abnormal and artificial level. The Morgan Stanley unit purchased the French sovereign bonds futures contracts to induce an artificial increase in the prices of French government bonds and Belgian bonds immediately before selling them, the committee said.

The committee said the company's acquisition of French sovereign bonds futures contracts was not in line with the strategy of the European government bonds desk and gave other participants a distorted picture of the French sovereign bond market.

However, AMF dismissed complaints that Morgan Stanley & Co. International was responsible for manipulating the prices of German sovereign bonds future contracts and Buxl futures contracts, stating that the company did not operate on these instruments to secure a certain price quotation.