Cboe Exchange fines Dash Financial Technologies for alleged rule violations
Cboe Exchange, Inc has published its disciplinary decision as to Dash Financial Technologies LLC regarding alleged rule violations.
On March 1, 2017, Dash acquired a third-party platform from another broker-dealer. From March 1, 2017 through November 8, 2017, Dash routed to nine options exchanges, including Cboe, approximately 60,277 options orders, totaling approximately 271,658 contracts from a broker-dealer client that had been incorrectly onboarded in the third-party platform as “Customer” instead of “Broker- Dealer.”
Dash learned of the issue in or about early October 2017, and by November 8, 2017, Firm technology personnel completed implementing corrective changes.
From on or about March 1, 2017 through on or about November 8, 2017, by submitting orders with inaccurate origin codes, Dash failed to make and maintain accurate books and records. The orders Dash routed with incorrect origin codes caused it to underpay Exchange fees and also caused the improper allocation of certain fees to contra-parties.
Additionally, each instance in which Dash routed an order with an incorrect origin code potentially had adverse consequences, such as inadvertently impacting the priority of order execution, creating an inaccurate audit trail and inaccurate order records, reporting trades to OCC with inaccurate trade details, and impeding Cboe’s ability to surveil for and detect potential violations of its rules and federal securities laws.
The acts, practices, and conduct described above constitute violations of Cboe Rules 4.22 and 6.51 by Dash, in that Dash submitted and executed orders with incorrect origin codes.
From on or about March 1, 2017 through on or about November 8, 2017, Dash failed to establish, maintain, and enforce written supervisory procedures, and a system for applying such procedures, reasonably designed to detect and prevent inaccurate origin codes in connection with its acquisition of a third-party platform. Dash waited a full calendar quarter after acquiring the third-party platform before it conducted an initial origin code review.
Moreover, for at least seven months after acquiring the third-party platform, Dash did not conduct any reviews to ensure that the client accounts it took over when it acquired the third-party platform had been on-boarded with a correct origin code.
Dash consented to the imposition of the following sanctions:
- A censure;
- A fine in the amount of $19,000;
- Disgorgement in the amount of $42,298.05; and
- Restitution in the amount of $20,539.40.
The disgorgement addresses the underpayment of Exchange fees, and the restitution addresses the improper allocation of certain fees to contra-parties. The harmed contra-parties have been identified and will be notified separately by the Exchange. This settlement relates to other settlements the Firm reached with Cboe BZX Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc., NYSE Arca, Inc., NYSE American, LLC, the NASDAQ Options Market LLC, Nasdaq BX, Inc., Miami International Securities Exchange, LLC, and MIAX PEARL, LLC.
Dash neither admitted nor denied that violations of Exchange Rules or the Securities Exchange Act of 1934, as amended and Exchange Act rules have been committed.