Interactive Brokers has agreed to a censure and a fine of $237,500 as a part of a settlement with NYSE Arca. The settlement was signed on October 23, 2020, but the document was made public last night.

During the period between January 8, 2015 and November 29, 2019 (the “Relevant Period), Interactive Brokers LLC violated NYSE Arca Rule 6.69-O (Reporting Duties) by reporting more than 525,000 orders (comprised of approximately 2.1 million contracts) with inaccurate origin codes to the Exchange.

The matter arises from a referral to NYSE Regulation by the Financial Industry Regulatory Authority (FINRA) following an examination by FINRA of Interactive Brokers’ compliance with NYSE Arca reporting obligations.

During the relevant period, the firm executed approximately 525,000 options orders on the Exchange that were reported to the Exchange inadvertently designated with an incorrect origin code of Customer, rather than the required Professional Customer code. The orders were executed on behalf of 12 Interactive Brokers’ customers and comprised nearly 2.1 million contracts.

Internally, Interactive Brokers created and maintained accurate records that designated the qualifying order flow with the Professional Customer origin code. However, because Interactive Brokers failed to recognize that certain of its order routing connections with the Exchange needed to be reconfigured in order to transmit the Professional Customer code designation for qualifying order flow, the records reported to the Exchange were mismarked.

As a result, Interactive Brokers’ internal records correctly reflected the Professional Customer origin code whereas the records reported to NYSE Arca incorrectly designated the order flow.

Upon recognizing the error, the firm remediated the issue. Furthermore, the firm has implemented additional supervisory controls and reviews.