FINRA fines Barclays Capital for overstating its trading volume
Barclays Capital Inc has agreed to pay a fine of $175,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
FINRA explains that broker-dealers advertise their daily trading volume in securities through Bloomberg and other subscription-based market data providers that use advertised trading volume to compile reports and rankings of broker-dealers by security. Overstatements of a broker- dealer’s advertised trading volume can therefore mislead market participants about which broker-dealers are most active or possess the most liquidity in particular securities.
Between January 2014 and February 2019, Barclays Capital used a proprietary system to calculate the volume of the firm’s trades and transmit that information to Bloomberg to be advertised. This system suffered from several technology flaws which caused various errors that led to inflated calculations of the firm’s trade volume. The system then automatically transmitted these trade volume calculations directly to Bloomberg, which posted them for advertisement.
The improper calculations that inflated the firm’s trade volume included: (i) counting trades that were subsequently canceled or corrected; (ii) counting transactions between Barclays Capital’s affiliates as if they were trades between the firm and non-affiliated entities; and (iii) double-counting trades executed in the market when there was a subsequent transfer of the same security in a riskless principal transaction.
In total, Barclays Capital overstated its advertised trading volume in more than 4,500 instances, concerning more than 2,600 unique securities, by approximately 147 million shares. The firm corrected the above-described technology flaws by February 2019.
Therefore, Barclays Capital violated FINRA Rules 5210 and 2010.
Also, between January 2014 and July 2018, Barclays Capital’s supervisory system and WSPs were not reasonably designed to achieve compliance with FINRA Rule 5210. Barclays Capital’s WSPs addressed neither how the firm should calculate its trading volume nor how the firm should monitor its advertised trading volumes for accuracy.
As a result, Barclays Capital failed to detect thousands of instances where the firm overstated its advertised trading volume. In July 2018, Barclays Capital implemented new WSPs addressing advertised trading volume.
In addition to the fine, Barclays Capital consents to the imposition of a censure.