NYSE Fines Floor Broker for Market Access Rule Violations

A floor broker settled NYSE charges for market access rule violations related to credit limits, erroneous order controls and improperly providing "market looks" to non-customers for a fee. 

According to the AWC, the firm violated SEC and NYSE rules on risk management controls, including supervisory and procedural violations. The NYSE found that the firm (i) assigned unreasonably high credit limits to customers, (ii) inputted inaccurate limits into the firm's systems and (iii) failed to document the rationale for credit limit determinations. The NYSE also found deficiencies in the firm's control parameters for erroneous orders, which included setting single-order limits far exceeding typical customer order sizes and operating controls as "soft" blocks without documenting overrides or reviews. Further, the NYSE found that the firm failed to conduct annual reviews or certifications of its market access controls as required. Overall, the NYSE found that the firm "fail[ed] to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial and regulatory risks of its business activities." 

The NYSE also found that the firm provided "market looks"—to non-customers for a fee. The NYSE found that the firm's written supervisory procedures prohibited the provision of market looks to non-customers, but that the firm did not sufficiently enforce or document compliance with these standards.

As a result, the NYSE determined that the firm violated, among others, SEA Rule 15c3-5 ("Risk management controls for brokers or dealers with market access"), NYSE (FINRA) Rules 3110(a) ("Supervisory System") and 3110(b) ("Written Procedures") as well as NYSE Rule 36 ("Communications Between Exchange and Members' Offices"). 

To settle the charges, the firm consented to (i) a censure and (ii) pay an $80,000 fine.