FINRA Fines Firm for ISO Routing Violations

A firm settled FINRA charges for failing to properly route Intermarket Sweep Orders ("ISOs") due to configuration errors in its automated system.

According to the AWC, over a period of almost two years, the firm routed approximately 88,500 orders marked as ISOs that did not meet regulatory requirements. FINRA stated that the logic in the firm's automated program was not appropriately configured for "DAY ISOs," causing the system to route limit orders that were not marked as ISOs when attempting to execute against equal- or better-priced quotations at other trading centers. FINRA stated that by failing to route the necessary limit orders marked as ISOs, the firm potentially failed to execute against protected quotations during the review period.

FINRA concluded that the firm violated Rule 611 of Regulation NMS ("Order protection rule") and FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

To settle the matter, the firm agreed to (i) a censure and (ii) a $6,930 fine, resolved simultaneously with similar matters for a total fine of $200,000.