A firm settled NYSE charges for failing to have in place a reasonable supervisory system designed to detect errors in "Market on Close" ("MOC") orders.
In a Letter of Acceptance, Waiver and Consent, the NYSE found that the firm routed a MOC basket order containing incorrect exchange-traded fund component securities. The NYSE found that the firm recognized its error before closing the cross, but that it canceled the order after the cut-off time. The NYSE stated that this incident showed that the firm's supervisory system:
- did not have a check in place to alert the firm to the manual error;
- did not reflect (in the written supervisory procedures) the allowed cancellation cut-off time;
- did not ensure appropriate risk management controls, as the technology that could have flagged an improper MOC cancellation had been disabled for more than six months; and
- was unable to generate alerts for potentially improper MOC cancellations.
As a result of its findings, the NYSE determined that the firm violated NYSE Rule 3110 ("Supervision").
To settle the charges, the firm agreed to (i) a censure and (ii) a $10,000 fine.
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