Market Maker Fined for Not Maintaining Good Quotes

A firm settled Nasdaq Stock Market LLC ("Nasdaq") charges for failure to maintain "continuous two-sided trading interest during regular market hours at prices within certain percentages away from the National Best Bid or Offer."

According to the Nasdaq AWC, the firm failed to use "the Designated Percentage or Defined Limit away from the then current NBBO in 5,591 instances." Nasdaq found that during times of extreme market volatility, the firm's market maker peg orders ("MMPOs") were frequently and unpredictably canceled. Nasdaq found that the firm addressed this issue by submitting attributable limit orders to help fulfill its market maker obligations, an approach that led to situations where, if a trader was away from his desk or if both sides of a quote were filled, the firm would end up posting quotes that were further than the allowed percentage or limit from the National Best Bid and Offer.

Nasdaq determined that the firm violated Nasdaq Rule Equity 2, Section 5(a)(2) ("Two-sided Obligation") and Nasdaq General 9, Sections 20 ("Supervision") by failing to establish and maintain a system to supervise registered representatives and associated persons designed to reach compliance with quoting obligations.

To settle the charges, the firm agreed to (i) a censure, (ii) pay a $30,000 fine, and (iii) an undertaking to revise its WSPs.