The Financial Industry Regulatory Authority, Nasdaq, the New York Stock Exchange and Cboe Global Markets all censured Credit Suisse Securities and fined the firm $6.5 million for supervisory and Securities Exchange Act of 1934/Market Access Rule violations after repeated failures to prevent market manipulation, FINRA said Monday.
Credit Suisse signed a letter of acceptance, waiver and consent on Nov. 18 in which it agreed to the censure and $6.5 million fine, of which $566,583 is to be paid to FINRA for violating multiple rules. FINRA accepted the letter Nov. 19.
A Credit Suisse spokesman on Monday said only that the firm was “pleased to have resolved these matters with FINRA and these exchanges.”
From July 2010 through July 2014, Credit Suisse offered its clients, including broker-dealers and other institutional entities, some of whom were foreign unregistered entities, direct market access to several exchanges, according to FINRA. The firm executed more than 300 billion shares on behalf of its direct market access clients and generated over $300 million in revenue from its DMA business, FINRA said.
During part of that time, certain of the firm’s direct market access clients engaged in trading activity that generated more than 50,000 alerts at FINRA and the exchanges for potential manipulative trading, including spoofing, layering, wash sales and pre-arranged trading, according to FINRA.
Three of Credit Suisse’s direct market access clients accounted for most of the 50,000 alerts for potentially manipulative activity, FINRA said, noting the same three clients at their peak represented about 20% of the firm’s overall order flow.
FINRA and the exchanges found that during most of the relevant period, Credit Suisse did not establish a supervisory system, including written supervisory procedures, that were reasonably designed to monitor for manipulative trading.