Instinet Settles FINRA Charges for Intermarket Sweep Order Routing Failures

Instinet, which provides market access and execution services to institutional market participants, settled FINRA charges for failing to capture certain protected quotation data necessary for informed decision-making when routing intermarket sweep orders ("ISOs") to exchanges.

In a Letter of Acceptance, Waiver and Consent, FINRA found that that "multiple programming and system errors" caused the broker dealer's failure to ensure compliance with National Market System requirements. FINRA stated that "the firm did not recognize, and thus did not route, additional ISOs necessary to execute against protected quotes displayed by certain market centers." FINRA also found that the broker-dealer failed to establish a supervisory system to ensure regulatory compliance.

As a result, FINRA determined that the broker-dealer violated Regulation NMS Rule 611(c) ("Order protection rule") and FINRA Rules 3110 ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the charges, the broker-dealer agreed to a (i) censure and (ii) fine of $450,000.