The American securities firm J P Morgan has been fined a record £350,000 for breaking the rules of the London Stock Exchange.

The breach happened last month when the firm manipulated the value of the 100 share index to its advantage.

The investigation was sparked by sharp movements in shares in drugs companies three weeks ago.

Trading in the shares caused an unusually sharp and sudden fall in the index.

There has been concern over the new trading system, called Sets, which has thrown up some unusual share valuations.

The new system quotes the price at which shares actually traded, whereas the old method quoted prices at which dealers said they were prepared to deal.

Prices can be swayed if a dealer puts in a very high or low price, when there are few orders on the screen.

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