A broker-dealer settled charges for failure to establish reasonable risk management protocols and supervisory efforts regarding Exchange Traded Product ("ETP") order flow.
In separate Letters of Acceptance, Wavier and Consent, the exchanges found that the firm did not establish or maintain risk management protocol or supervisory procedures that would prevent the acceptance of trades that exceeded the maximum price or size parameters set by the Exchange Act.
As a result of these findings, the exchanges determined that the firm violated (i) SEA Rule 15c3-5(b), which requires broker-dealers with market access to establish reasonable risk management protocols, (ii) SEA Rule 15c3-5(c)(1)(ii), which requires firms to establish written supervisory and risk management procedures designed to prevent incorrect orders, and (iii) various exchange rules requiring firms supervise compliance.
To settle the charges, the firm agreed to (i) a censure, (ii) a $225,000 fine, and (iii) an undertaking that guarantees the firm will revise its risk management and supervisory processes to comply with exchange rules and industry standards.
The action was brought by FINRA on behalf of NYSE, NYSE Arca, Inc., Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., The Nasdaq Stock Market LLC, Nasdaq BX, Inc., Nasdaq GEMX, Inc., Nasdaq ISE, LLC, Nasdaq MRX, LLC, The Nasdaq Options Market LLC, and Nasdaq PHLX LLC.
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