Nomura faces fine for Japan government bond market manipulation

NOMURA Holdings faces a 21.8 million yen (S$194,514) fine for allegedly manipulating the Japanese government bond futures market, a setback for the nation’s biggest brokerage during a revival of trading in the securities. 

An employee at the company’s domestic securities unit is suspected of fraudulently moving Japanese government bond futures prices in 2021, the Securities and Exchange Surveillance Commission (SESC) said on Wednesday (Sep 25).

The dealer profited by placing large orders without intending to buy or sell all of them, the watchdog said. 

The potential fine 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. 

Nomura takes the matter seriously, including by confirming the facts, a company spokesperson said, after The Japan News reported the probe earlier. The spokesperson declined to comment further. 

Shares of Nomura closed 1.5 per cent lower in Tokyo on Wednesday. 

The SESC has recommended fines to the Financial Services Agency, Japan’s financial regulator.

Securities companies have been penalised for manipulation of the Japanese government bond futures market in the past, leading to a loss in business.

Citigroup was fined 133 million yen in 2019, and suspended from the primary group of dealers that participate at certain Japanese government bond auctions.

A year earlier, Mitsubishi UFJ Financial Group securities venture with Morgan Stanley received a penalty of 218 million yen, and was also suspended from the group.

The venture was also dropped as an underwriter of several corporate bond deals. 

It would be a blow to Nomura if it loses underwriting business, as it seeks to capitalise on the rebound in bond market activity in Japan. BLOOMBERG