Broker-Dealer Settles Exchange Charges for Origin Code Reporting Failures

A broker-dealer settled parallel charges brought by NYSE Arca, Inc. and NYSE American LLC (collectively, the "Exchanges") for origin code reporting failures and related supervisory and monitoring deficiencies.

In separate Letters of Acceptance, Wavier, and Consent, the Exchanges found that a client of the firm was incorrectly on-boarded to one of the firm's third-party trading platforms with the wrong origin code. This resulted in orders placed by the broker-dealer being incorrectly reported to clearing organizations, which in turn allowed the broker-dealer to avoid certain fees it would have otherwise incurred. In addition, the Exchanges found that the firm did not have adequate written supervisory procedures to monitor on-boarding procedures to achieve compliance with specific rules of the Exchanges. Specifically, the Exchanges found that when the broker-dealer acquired the third-party platform, it "did not conduct any reviews to ensure that the client accounts it took over when it acquired [the third-party platform] had been on-boarded with the correct origin code."

Both Exchanges concluded that the broker-dealer violated Exchange Act Section 17(a)(1) ("Records and reports") and SEA Rule 17a-3(a)(6)(i) ("Records to be made by certain exchange members, brokers and dealers"). Additionally, NYSE Arca found that the broker-dealer violated NYSE Arca Rule 6.68-O(a)(8) ("Record of Orders"), Rule 6.69-O ("Reporting Duties"), Rule 11.16 ("Books and Records") and Rule 11.18 ("Supervision"). NYSE American found the broker-dealer to be in violation of NYSE American Rule 320 ("Offices—Approval, Supervision and Control"), Rule 324 ("Books and Records"), Rule 956NY(a)(8) ("Record of Orders"), Rule 957NY(e) ("Reporting Duties") and Rule 964NY(b)(2)(A) ("Display, Priority and Order Allocation - Trading Systems").

To settle the charges, the broker-dealer agreed to (i) censures and (ii) a $47,500 fine paid to NYSE Arca, Inc. and NYSE American LLC (of which NYSE Arca, Inc. received $40,000 and NYSE American LLC received $7,500).