(Dec 6): Nomura Holdings Inc, Japan’s biggest brokerage, dismissed senior trader Takushi Sawada after regulators concluded that he had arranged the manipulative transactions that have tipped the firm into scandal.

Sawada’s employment at Nomura was “terminated” Sept 30 after a Japanese markets watchdog found that he had “engaged in manipulative trading” of derivatives tied to the country’s sovereign debt, according to a filing with the US Financial Industry Regulatory Authority. The transactions amounted to “layering,” a version of an illicit practice known as spoofing, the filing shows.

Nomura chief executive officer Kentaro Okuda has been under pressure to restore the bank’s reputation since Japanese authorities disclosed the trades in September. The firm’s role in state bond auctions was crimped while corporate clients such as Toyota Finance Corp and Sumitomo Mitsui Trust Holdings Inc took some of their business elsewhere.

“All trading staff are trained repeatedly by Nomura and Finra that spoofing is unacceptable and sign many acknowledgements and attestations of compliance,” a Nomura spokesperson said. “All staff bear obligations to escalate any concerns of impropriety.”

Sawada first joined Nomura in Tokyo in 2002, according to the Finra filing. He rose to become one of the most senior traders in Japanese government bonds, a market almost US$8 trillion (RM35.33 trillion) in size where the bank has considerable clout.

The Securities and Exchange Surveillance Commission, the investigative arm of Japan’s Financial Services Agency, disclosed Sept 25 that an unidentified Nomura trader had manipulated the market for derivatives tied to 10-year government bonds. The employee arranged a series of buy-and-sell orders and then cancelled them, the watchdog said.

An SESC official declined to comment on the Finra filing. Sawada couldn’t immediately be contacted for comment.

This kind of trading can manipulate a market by creating a false impression of supply or demand. Regulators in the US have clamped down on the practice since the 2010 Dodd-Frank Act and pursued multiple banks. In September, Toronto-Dominion Bank agreed to pay more than US$20 million to resolve allegations that a former trader had placed “hundreds of fraudulent spoof orders” in the market for US treasury securities.

Some clients have returned to Nomura after the brokerage explained to them measures it is taking to prevent a recurrence of the breach, Bloomberg previously reported. The country’s megabanks have resumed trading activities with the lender and at least four insurers that had halted their equity or bond dealings with Nomura are also restarting these activities.

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