E*Trade Clearing LLC agreed to pay $225K to settle NYSE charges it violated NYSE Rules 410A and 342 relating to the preparation and submission of accurate e-blue sheets.  NYSE Regulation examined 220 EBS submissions and found that 178 are alleged to have improperly omitted trades effected by affiliated broker-dealers. Market Surveillance found the apparent errors.  The firm, back in January 2006, paid a $150K fine related to blue sheet reporting. 

    The Investigation.    For nearly 2 _^1/2  years, E*Trade Clearing ("EClear") routed customer equity orders for execution from E*Trade Capital Markets ("ECap") and E*Trade Canada ("ECan") to a number of market makers and market centers, including the NYSE.  During that time, EClear submitted inaccurate trading information in 178 submissions in violation of Rule 410A, in that it didn't include transactions effected by 2 of its affiliates - ECap and ECan.  And of course, supervisory systems were in violation.

    Supervisory Deficiency.   According to NYSE-Reg, E*Trade Clearing failed to live up to the terms of its 2006 settlement, under which the firm was required to conduct a validation of all required blue sheet data elements in accordance with ISG Memorandum.  Therefore, it was incumbent upon the firm to ensure that its EBS systems were working properly, including the requirement to include all transactions. 

Sadly, NYSE-Reg said it did not.   For further details, click onto:  [FINRA Proceeding 20100241268, 11/3]