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Regulation and Compliance > Federal Regulation > FINRA

Barclays Hit With $2M Fine Over Best Execution Failures

Melanie Waddell By Melanie Waddell

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The Financial Industry Regulatory Authority said Wednesday that it has fined Barclays Capital $2 million for failing to comply with its best execution obligations in connection with its customers’ electronic equity orders.

From January 2014 through February 2019, Barclays Capital owned and operated an alternative trading system known as LX.

“Barclays Capital routed all its customers’ marketable orders to LX, prior to routing to any competing venue, if the order could be filled in LX completely or partially at the National Best Bid and Offer or better, unless customers opted out of this routing preference,” FINRA states.

Barclays Capital failed to conduct reasonable reviews of execution quality for its customers’ orders and did not review price improvement data for orders routed to LX, FINRA said.

Other failures include not reviewing speed of execution for any of the venues to which it routed customers’ orders or considering whether the firm could have obtained better execution speed from competing markets, and failing to consider alternate routing arrangements even when the firm’s own data showed that fill rates in LX were inferior to fill rates at some competing venues, according to FINRA.

“Specifically, the reports reviewed by the firm’s Best Execution Working Group indicated that marketable orders routed to LX received lower fill rates as compared to certain competing venues. These reports showed that LX delivered a lower fill rate than the average fill rate of competing venues for every quarter from 2015 to the first quarter of 2019,” FINRA said.

Jessica Hopper, executive vice president and head of FINRA’s Department of Enforcement said that “FINRA continues to prioritize broker-dealers’ compliance with best execution requirements when handling their customers’ orders. Firms must continuously monitor their reviews of execution quality and make changes accordingly.”

Melanie Waddell

@Think_MelanieW

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