Broker-Dealer Settles NYSE Charges for Market Access Control and Supervisory Violations

A broker-dealer settled NYSE charges for failing to reasonably design market access controls to prevent entry of erroneous order management systems ("OMSs").

In a Letter of Acceptance, Waiver, and Consent, the NYSE found that the firm (i) routed the wrong order through an OMS causing a decrease in price; (ii) effectuated short sales in securities without having borrowed the security or having maintained reasonable grounds that the security could be borrowed; and (iii) failed to implement controls to prevent the entry of orders solicited from institutional customers in restricted securities. Additionally, the NYSE found that the firm failed to prevent these violations because its financial risk management controls and supervisory procedures were not reasonably designed to prevent them, including controls on sufficient average daily volume and single orders.

As a result, NYSE determined that the firm violated SEA Rule 15c3-5(b) ("Risk management controls for brokers or dealers with market access"), including 15c3-5(c)(1) ("Supervisory procedures"). Additionally, the firm was found to have violated NYSE (FINRA) Rule 3110(a) ("Supervisory System") and 3110(b) ("Written Procedures").

To settle the charges, the company agreed to (i) a censure and (ii) pay a $125,000 fine, of which $62,500 was allocated towards resolving this matter and the remaining $62,500 was used to resolve a parallel matter.