Broker-Dealer Settles Charges for Ignoring NYSE Arca "Priority Rules"

A broker-dealer settled NYSE Arca charges for violating rules of priority when it did not prioritize customers' bids at the same price as the broker-dealer's orders.

According to the AWC, the broker-dealer failed to appropriately yield priority to customer orders displayed on the NYSE Arca Consolidated Order Book that were bid or offered at the same price as orders that the broker-dealer systematized, announced and consummated on 15 separate occasions. According to NYSE Arca Rule 6.75-0(a), the highest bid has priority, but where two or more bids for the same option contract are at the highest price and one such bid is for the account of a customer, the customer's bid takes priority.

In addition, NYSE Arca found that the broker-dealer failed to (i) conduct supervisory reviews for potential priority violations, (ii) provide guidance concerning compliance with its priority obligations and (iii) conduct any trainings for its employees concerning compliance. NYSE Arca said the broker-dealer was on notice of its supervisory deficiencies due to a prior informal disciplinary action for priority and related supervisory rule violations, yet failed to revise its supervisory system or its WSPs accordingly.

NYSE Arca found that the broker-dealer violated NYSE Arca Rule 6.75-0 ("Priority and Order Allocation Procedures - Open Outcry") and NYSE Arca Rules 11.18(b) and (c) ("Supervision").

To settle the charges, the broker-dealer agreed to (i) a censure and (ii) a $10,000 fine.