A broker-dealer settled NYSE Arca, Inc. ("NYSE Arca") charges for "failure to properly announce a customer order" and related supervision failures. NYSE Arca alleged that the broker-dealer allowed its customer to hedge an option in the cash market before informing the trading crowd on the floor of the option order.
In a Letter of Acceptance, Waiver and Consent, NYSE Arca found that, on January 26, 2021, the firm's phone clerk informed a customer that its option transaction had been announced, although the option order's size and price were not announced to the trading crowd. The customer conveyed this information to the counterparty party for the option, who was then able to hedge the option before the order was conveyed to the trading crowd on the exchange floor. As a result, the trading crowd was not given the opportunity to participate in the option trade under the same conditions as the counterparty party.
NYSE Arca found that the firm's supervisory system was not reasonably designed to ensure that its customers would only be informed of an order's announcement after all of the order's material terms have been conveyed to the trading crowd.
As a result, NYSE Arca found that the firm allegedly violated NYSE Arca Rules 11.1(b) ("Adherence to Law and Good Business Practice") and 11.18(b) ("Supervision").
To settle the charges, the broker-dealer agreed to (i) a censure, and (ii) a $20,000 fine.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.