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NEWSLETTERS & ALERTS
Deutsche Bank, Citigroup, JPMorgan, Interactive Brokers Violated Market Access Rule
FINRA, BATS, the Nasdaq, the NYSE, and their affiliated exchanges issued fines totaling $4.75 million against four firms for Market Access Rule violations.
- Deutsche Bank Securities ($2.5 million);
- Citigroup ($1 million);
- JPMorgan ($800,000);
- Interactive Brokers ($450,000).
Rule 15c3-5 of the Securities Exchange Act of 1934 (the "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. The firms named in this case collectively provided market access to numerous clients that executed millions of trades per day.
FINDINGS BY REGULATORS. The four firms failed to comply with one or more provisions of the Market Access Rule, namely:
- failure to implement financial and regulatory risk management controls and procedures reasonably designed to prevent the entry of erroneous or duplicative orders;
- failure to prevent the entry of orders that exceeded appropriate pre-set credit or capital thresholds;
- failure to supervise customer trading to detect and prevent potentially violative and manipulative activity.
FINRA and the Exchanges considered various criteria in determining sanctions, including, the following:
- the number of erroneous orders that were entered on the Exchanges by the firms;
- potentially manipulative trading activity that went undetected by the firms;
- the market impact (both real and potential) of the underlying violative activity;
- the extent to which red flags were present;
- the firms’ disciplinary histories;
- the nature of the supervisory failures;
- the breadth and duration of the firms’ overall failures;
- remediation of the problematic conduct; and,
- cooperation provided during the course of the investigations.