(Sept 25): Nomura Holdings Inc faces a ¥21.8 million (US$152,000 or RM626,822) fine for allegedly manipulating the Japanese government bond (JGB) futures market, a setback for the nation’s biggest brokerage during a revival of trading of the securities. 

An employee at the company’s domestic securities unit is suspected of fraudulently moving JGB futures prices in 2021, the Securities and Exchange Surveillance Commission (SESC) said in a statement on Wednesday. The dealer profited by placing large orders without intending to buy or sell all of them, the watchdog said. 

The potential fine, while small, may hurt Nomura’s reputation at a time when it is refocusing on Japan as a key growth area for its trading and investment banking business. The nation’s bond market has come back to life after the Bank of Japan raised interest rates and scrapped a policy of controlling bond yields earlier this year. 

The act is serious and undermines the credibility of a securities firm as a gatekeeper in the market, an SESC official said. The watchdog opted to penalise the company, rather than the individual, because the employee was trading for Nomura’s own account, and the firm was responsible for the ensuing profit, the official said at a news briefing in Tokyo. 

Nomura takes the matter seriously, including by confirming the facts, a company spokeswoman said after the Yomiuri newspaper reported the probe earlier. She declined to comment further.

Shares of Nomura closed 1.5% lower in Tokyo on Wednesday. 

The SESC recommends fines to the Financial Services Agency, Japan’s financial regulator, which usually carries them out weeks later. Securities firms have been penalised for manipulation of the JGB futures market in recent years, leading to a loss in business.

Citigroup Inc was fined ¥133 million in 2019 and suspended from the primary group of dealers that participate at certain JGB auctions. A year earlier, Mitsubishi UFJ Financial Group Inc’s securities venture with Morgan Stanley received a ¥218 million penalty and was also suspended from the group. The venture was also dropped as an underwriter of several corporate bond deals. 

Should Nomura also lose underwriting business, that would be a blow to the company as it seeks to capitalise on a rebound in bond market activity in Japan. 

The firm’s fixed-income revenue jumped 29% in the quarter ended June from a year earlier. Investment-banking revenue rose 22%.  

Uploaded by Tham Yek Lee