JSE Ltd., operator of Johannesburg’s stock exchange, dismissed Allan Thomson as director of equity derivatives trading for irregular trading on his own account.
Thomson, 45, traded in both the derivatives and cash markets for his own account and without authorization, Chief Executive Officer Russell Loubser said by phone today. Personal-account trading is allowed in certain departments within the JSE if prior permission was granted, he said.
“Those procedures were not followed by Allan and a disciplinary process took place,” Loubser said. “Allan was found guilty and he was dismissed. The rules were breached.”
Thomson, who led the JSE’s move to the electronic trading of certain equity derivative products through the bourse’s central order book, said he placed orders in the market to block participants who were trying to bypass the central order book.
Thomson was removed from his post on Nov. 4, the JSE said in an e-mailed statement today. Graham Smale, director of the bourse’s interest-rate products, will take over until a permanent replacement is found. The departure may lead to a restructuring of the equity derivatives division, Loubser said, without providing further details.
“It was with the full knowledge of my team and wasn’t done for personal profit,” Thomson said by phone. “I did something that a director of the JSE shouldn’t be doing, but at the same time I thought it was for the benefit of the market and it was born out of frustration. The bottom line was that I took the law into my own hands.”
The JSE considered the fact that Thomson had not benefited personally from the trades before dismissing him, Loubser said.
“Unfortunately it still amounts to unauthorized trading,” he said. “It’s terribly unfortunate because he has done tremendous stuff for the JSE over 10 years, but it can’t be condoned.”
Thomson said he had planned to resign from the bourse at the end of the year, “just not under these circumstances,” and doesn’t expect to take any action against the JSE.
No further action would be taken against Thomson, Shawn Davies, the bourse’s director of surveillance said in an e-mailed response to Bloomberg.
“It hasn’t been handed over to police because his conduct was not of that nature,” Davies said. “There were no victims as such and no money was lost.”
The JSE began electronic trading in single stock futures in December. The move was resisted by some brokerages as it cut profits and resulted in increased investment in computer systems, Thomson said in an interview on Aug. 12. Increased transactions on the electronic system led to a number of technical problems that left banks and brokers unable to trade the derivatives.
“Considering recent interruptions in trading in the central order book and all the disruption around the move to the central order book I would have thought the JSE had a duty to be extra vigilant and extra careful, so it’s unfortunate something like this could happen,” said John Vorster, head of online initiatives at Johannesburg-based PSG Online, a unit of investment holding company PSG Group Ltd.
JSE shares declined for a second day, losing 0.9 percent to 71.40 rand by the 5 p.m. close in Johannesburg, compared with a 0.5 percent gain in the FTSE/JSE Africa All Share Index.