Broker-Dealer Fined for Failing to Maintain Supervisory System Designed to Detect Spoofing

A broker-dealer settled charges with FINRA for failing to have a supervisory system in place that could reasonably detect potential "spoofing" and "layering."

In a Letter of Acceptance, Waiver and Consent, FINRA said that the broker-dealer's equity trading desks collectively executed approximately 5,000 equity transactions per day while using a supervisory system that did not properly monitor for potential spoofing or layering by its traders. FINRA said that the parameters used by the broker-dealer's automated surveillance system were unreasonable because the parameters did not capture spoofing or layering in "smaller-sized or single orders[.]"

As a result, FINRA found that the broker-dealer violated FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the broker-dealer agreed to (i) a censure and (ii) pay a $200,000 fine.