Blue Ocean ATS has agreed to pay a fine of $550,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

Since inception, Blue Ocean’s ATS has accounted for approximately 95% of all trading volume in the overnight session, including a substantial volume of low-priced securities.

Despite the well-known risks associated with trading low-priced securities, including potential price manipulation, the firm did not have reasonable policies and procedures to detect and cause the reporting of suspicious activity since at least January 2023 to the present, in violation of FINRA Rules 3310 and 2010.

During the same period, Blue Ocean’s supervisory system, including its written supervisory procedures (WSPs), did not address various forms of manipulation relevant to its business. The firm’s manual review of two reports to detect manipulative trading was unreasonable, including because the reports were limited in scope and not reasonably designed to detect patterns.

The firm therefore violated FINRA Rules 3110 and 2010.

Blue Ocean has agreed to a censure and an undertaking on top of the $550,000 fine.

Blue Ocean has been registered with FINRA since October 2020. The firm is headquartered in West Palm Beach, Florida, and has one branch office and 14 registered representatives.

In June 2021, Blue Ocean began operating an alternative trading system (ATS) for matching orders in National Market System (NMS) stocks. The firm’s subscribers are broker-dealers registered with FINRA. Subscribers to the Blue Ocean ATS may elect to receive ATS market data that includes depth of quote data which, subject to certain exceptions, includes all open buy and sell orders for each security at various price levels. Blue Ocean’s ATS operates in an overnight session, between 8:00 PM ET and 4:00 AM ET.