FINRA fines BGC Financial for delayed handling of limit orders

Maria Nikolova

Between the third quarter of 2015 and the first quarter of 2018, the firm failed to immediately execute, route or display customer limit orders in OTC securities.

The United States Financial Industry Regulatory Authority (FINRA) has imposed a fine of $40,000 on BGC Financial, L.P. as a part of a settlement of alleged rule violations.

Between the third quarter of 2015 and the first quarter of 2018, BGC Financial failed to immediately execute, route or display customer limit orders in OTC securities, thus violating FINRA Rules 6460 (the Limit Order Display Rule) and 2010. The violations resulted from the firm’s delayed handling of limit orders that would lock or cross the market.

In particular, BGC Financial’s order management system (OMS) was programmed to automatically display orders received from the firm’s broker-dealer customers. The firm applied an exception for orders that would lock or cross the market. These orders would not automatically display, but would instead remain in a trader’s queue pending manual action.

FINRA reviewed a sample of 150 customer limit orders during the Review Period (from Q3 2015 to Q1 2018) and determined that BGC Financial violated the Limit Order Display Rule in 70 instances. In each instance, the firm’s limit order would have locked or crossed the quotation of another OTC market maker if the firm had displayed the limit order.

In 37 instances, the firm neither made reasonable efforts to execute against the market maker’s quotation within 30 seconds of receipt of the customer’s order (or as soon as practicable after the open for some orders) which would have allowed the firm to display the customer limit order, nor it took alternative steps of immediately routing, executing or canceling the customer limit order. In the other 33 instances, the firm failed to make a subsequent attempt to access the quote of an OTC market maker within 30 seconds of its initial attempt to do so. This conduct violates FINRA Rules 6460 and 2010.

On top of the fine of $40,000, BGC Financial consents to the imposition of a censure.

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