Clearing Broker Charged with Supervisory Failures on Trading in Non-US Omni Accounts

A clearing broker settled Nasdaq Stock Market LLC charges for failing to monitor for manipulative trading practices.

According to the AWC, a significant part of the firm's trading was for an omnibus account maintained for a non-US, affiliated broker-dealer. Nasdaq found that the firm did not have procedures to detect manipulative trading, including layering, spoofing, wash sales, marking the open or close and pre-arranged trading. Nasdaq found that the firm relied excessively on exception reports generated by the non-US introducing brokers, which proved insufficient to detect manipulative trading.

Nasdaq identified specific deficiencies in the firm's practices, including: (i) failing to deploy automated surveillance tools for key manipulative trading schemes; (ii) failing to sufficiently staff its supervisory team; and (iii) failing to act or accepting inadequate explanations from its introducing brokers despite repeated alerts.

Nasdaq determined that the firm violated General 9, Sections 1(a) and 20(a).

To settle the charges, the firm agreed to: (i) a censure; (ii) pay a $500,000 fine; and (iii) engage an independent consultant to review and enhance its supervisory systems and WSPs, with findings and recommendations to be reported to Nasdaq