Brokerage Firms Settle NYSE Arca Charges for Inadequate Market Access Controls

Affiliated broker-dealers settled charges from NYSE Arca ("the Exchange") for failing to establish and maintain a system of risk management and supervisory procedures reasonably designed to prevent submission of erroneous orders.

In separate Letters of Acceptance, Waiver, and Consent (see here and here), the Exchange found that the firms did not have sufficient protocols in place to limit the entry of erroneous orders. The Exchange recognized that the firms had throttle controls in place that limited the number of orders that could be executed per second, but said traders could change the throttle thresholds without warning or explanation. The Exchange found that the firm and its subsidiary could not justify the high threshold being used by its options and equities traders.

The Exchange determined that the firm violated SEA Rule 15c3-5(b)-(c) ("Risk management controls for brokers or dealers with market access"), as well as NYSE Arca Rule 11.18 ("Supervision"). The Exchange also found that the subsidiary violated SEA Rule 15c3-5(b)-(c)(1)(i) and also violated NYSE Arca Rule 11.18.

To settle the charges, the brokerage firm and its subsidiary agreed to (i) accept a censure and (ii) pay a total fine of $105,000, of which $30,000 was paid by the brokerage firm and $75,000 was paid by the subsidiary.