The Financial Supervisory Authority of Norway (Finanstilsynet) criticized the Norwegian branch of Nasdaq Clearing in connection with its handling and oversight of Einar Aas, the Norwegian power trader whose Nordic and German futures and forwards power spread positions went awry last year, prompting the exchange to place him in default on September 11, 2018, after he could not satisfy margin calls. The close-out of positions by the exchange exceeded Mr. Aas’s collateral and other members’ default fund contributions and required an extraordinary levy on members by Nasdaq Clearing to restore the default fund to Eur $107 million. 166 clearing member firms were required to make contributions on a pro rata basis. (Click here for general background regarding the default events, and here for a comprehensive set of related questions and answers by Nasdaq Clearing.)
In its report, FSA criticized Nasdaq Oslo’s local adaption of policies and procedures “to ensure that internal controls can be carried out and documented in a proper manner.” The regulator also cited Nasdaq Oslo and its Norwegian branch for having a “blurred division of responsibilities and unclear reporting lines.” FSA urged Nasdaq Oslo to ensure that exchange members are fit at all times. The company must advise FSA of “corrective measures” it is instituting in response to FSA’s report by March 1. Separately, the Financial Supervisory Authority of Sweden (Finansinspektionen) issued a paper regarding auction proceedings used after a default and central counterparty clearing houses’ recovery and resolution capabilities, sparked by the September 2018 incident.