FINRA fines VIRTU Americas for transmitting 1.5bn reports with incorrect info
VIRTU Americas LLC has agreed to pay a fine of $120,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
Between October 2013 and April 2018, the firm violated FINRA Rules 7450 and 2010 by failing to comply with its Order Audit Trail System (OATS) reporting obligations.
Between October 2013 and September 2016, VIRTU Americas transmitted approximately 1.56 billion reportable order events (ROEs) to OATS with inaccurate Account Type Codes, which provide information about the type of account for which the orders were submitted. The firm inaccurately reported the ROEs to OATS with an Account Type Code of ‘U.’ This indicated that the firm received these orders from another broker-dealer for unknown beneficial owners, even though the firm did not receive the order from another broker-dealer and the account owners were known to the Firm.
These inaccurate reports occurred after the firm acquired multiple affiliates with separate Market Participation Identifiers (MPIDs) and the orders were associated with those MPIDs.
Additionally, between April 2015 and April 2018, the firm transmitted 3,864,198 execution reports to OATS that were required to be matched to the related trade report in a FINRA transaction reporting facility. These reports contained inaccurate reporting exception codes, generated by the firm’s electronic systems, which incorrectly indicated that there were no corresponding trade reports to match to each report.
Also, beginning on February 2, 2015, the firm, as a FINRA member operating an ATS, was required by Rules 6160, 6170, 6480, 6720, and 7440 to use a unique MPID to report ATS transactions and was required to link all OATS execution reports from the firm’s ATS to a media-reported trade report.
However, from February 2, 2015 through August 2016, the firm failed to match 71,282,385 execution reports to a media trade report because it had not updated its execution protocol and related technology system to address the requirements for certain types of executions. These execution reports represented 77.54% of the total execution reports submitted by the firm’s ATS during the same period.
Further, during several periods in 2016 and 2017, the firm, through several of its MPIDs, failed to transmit a total of 2,750,534 ROEs to OATS.
Finally, the firm was found to have failed to establish and maintain a supervisory System, including written supervisory procedures, reasonably designed to achieve compliance with FINRA Rule 7450.
On top of the fine, VIRTU has agreed to a censure.