FINRA has censured and fined New York-based Trillium Brokerage Services, LLC, $1 million for using an illicit high frequency trading strategy and related supervisory failures. Through its 9 prop traders, Trillium entered numerous layered, non-bona fide market moving orders to generate selling or buying interest in specific stocks - often in relatively substantial sizes - thereby creating a false appearance of buy- or sell-side pressure.

    Modus Operandi.   This trading strategy induced market participants to enter orders to execute against limit orders previously entered by the Trillium traders.  Once their orders were filled, the Trillium traders would then immediately cancel orders that had only been designed to create the false appearance of market activity.  Trillium's traders used this improper high frequency trading strategy to obtain advantageous prices on 46,000 occasions.  Other market participants were unaware that they were acting on the layered, illegitimate orders entered by Trillium traders.

FINRA's investigation found that 9 Trillium prop traders intentionally created the appearance of substantial selling or buying interest on Nasdaq and NYSE Arca.  They bought and sold Nasdaq securities in this manner in over 46,000 instances - generating $575,000 in profits. 

    Punishment to Individuals.   Action was taken against the Director of Trading and the firm's Chief Compliance Officer (CCO), along with  the nine traders.  All 11 individuals were suspended from the securities industry or as principals for anywhere from 6 months to 2 years.  FINRA levied a total of $802,500 in fines against the individuals, ranging from $12.5L to $220K, and required the traders to pay out disgorgements totaling about $292,000.

Chief Compliance Officer.   Fined $50,000, fine, suspended as a principal for 1 year.

Director of Trading.   Fined $200,000, suspended as a principal for 2 years.

For further details, click onto:   [ FINRA News Release, 9/13 ]