Deutsche Bank Securities Inc., Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Interactive Brokers LLC were censured and fined $4.75 million Thursday for violating various provisions of the Securities and Exchange Commission’s Market Access Rule and related exchange supervisory rules.
The actions were taken by the Financial Industry Regulatory Authority along with BATS, a CBOE Holdings company; The NASDAQ Stock Market LLC; the New York Stock Exchange; and their affiliated exchanges.
The firms neither admitted nor denied the charges but consented to the entry of FINRA’s and the Exchanges' findings.
The sanctions were apportioned among FINRA and the exchanges and are as follows:
Between May and July:
- Deutsche Bank was fined a total of $2.5 million.
- Citigroup was fined a total of $1 million.
- J.P. Morgan was fined a total of $800,000.
- Interactive Brokers was fined a total of $450,000.
The SEC’s Market Access Rule requires, among other things, that broker-dealers that access an exchange or an alternative trading system or provide their customers with access to these trading venues must adequately control the financial and regulatory risks of providing such access.
The purpose of this requirement is to prevent firms from jeopardizing their own financial condition and that of other market participants, while also ensuring the stability and integrity of the financial system and the securities markets.
According to a FINRA and exchange statement, “the firms involved in these matters collectively provided market access to numerous clients that executed millions of trades per day.”
Specifically, FINRA and the exchanges said that they found the firms failed to comply with one or more provisions of the Market Access Rule, such as by failing to implement financial and regulatory risk management controls and procedures reasonably designed to prevent the entry of erroneous or duplicative orders; prevent the entry of orders that exceeded appropriate preset credit or capital thresholds; or supervise customer trading.
Additionally, FINRA states, the firms were found to have failed to comply with their obligations under the supervisory rules of FINRA and the exchanges to establish and maintain a reasonably designed system, including written supervisory procedures, to supervise the activities of their customers.
“It is important that firms have reasonable market access procedures in place to appropriately monitor for errors and risks that can be harmful to the integrity of our securities markets,” said FINRA and the exchanges in a joint statement.
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