StoneX Financial Inc., formerly known as INTL FCStone Financial Inc, has agreed to pay a fine of $70,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From July 2017 through March 2020, StoneX Financial acted as a market-maker in OTC securities, including securities quoted on OTC Link LLC, an inter-dealer quotation system formerly referred to as the “Pink Sheets.”

As a market-maker that quoted on OTC Link, the firm had access to, and regularly used, an electronic messaging service. This electronic messaging service enabled the firm and other individual market-makers to send each other messages (OTC Link messages) indicating an interest to buy or sell a specific number of shares of a security at a particular price.

During this period, StoneX Financial’s market-making desk sent and received OTC Link messages to and from other dealers. StoneX Financial, however, did not integrate the OTC Link messages that it received into its order management system used to execute orders. As a result, on certain occasions, due to the firm’s manual process, StoneX Financial did not execute an order received from a customer of another broker-dealer at the better-available price from an OTC Link message received.

For example, on one day during the relevant period, StoneX Financial received at 7:30:01 a limit order from a broker-dealer’s customer to buy 2,000 shares of a stock at $.85 per share. At 9:30:01, the firm’s market-making desk received an incoming OTC Link message from another broker-dealer to sell 2,000 shares of the stock at $.786.

At 09:30:16, after having had both the subject order and the OTC Link message in its possession for approximately 15 seconds, the firm filled the subject order in full at $.84, rather than the better price of $.786 that was reflected in the OTC Link message.

Seven seconds later, at 09:30:23, the pending OTC Link message received by the market- making desk expired unexecuted.

From July 2017 through March 2020, as a result of the manual process described above, StoneX Financial did not provide best execution in connection with 1,674 orders in OTC securities by failing to use reasonable diligence to ascertain the best market for the subject securities and to buy or sell in such market so that the resultant prices were as favorable as possible under prevailing market conditions.

Therefore, StoneX Financial violated FINRA Rules 5310 and 2010.

From July 2017 through March 2020, StoneX Financial’s supervisory system for best execution in OTC securities failed to account for price opportunities available through OTC Link messages when evaluating the execution quality of orders received from customers of other broker-dealers. Because the firm’s supervisory system excluded reviews of prices available in OTC Link messages, it had no way to determine whether such orders received an inferior execution to that available via OTC Link messages.

As a result, the firm did not have a system to reasonably supervise its best execution obligations for such orders in OTC securities.

In addition to the fine of $70,000, the firm has agreed to a censure. It will also pay restitution of $27,074.36 plus interest.