FINRA fines Deutsche Bank Securities $2m for best execution issues with SuperX

Rick Steves

This routing preference created an inherent delay for orders that were not fully executed in the firm’s ATS, thus subjecting orders to potentially lower fill rates.

FINRA has fined Deutsche Bank Securities, Inc. $2 million for failing to comply with its obligation to seek best execution for its customers’ orders.

The regulator claims the financial services firm didn’t comply with FINRA Rule 5310, which requires firms to seek the most favorable terms reasonably available for a customer’s orders.

In order to do that, firms must evaluate the order execution quality and routing arrangements by conducting reviews to several factors such as price improvement and speed of execution.

Jessica Hopper, Executive Vice President and Head of FINRA’s Department of Enforcement, said: “The duty to seek best execution for customer orders is a fundamental obligation of any broker-dealer that buys or sells securities on behalf of customers. We will continue to pursue disciplinary action against firms that fail to use reasonable diligence to execute customer transactions so that the price is as favorable as possible under prevailing market conditions.”

SuperX created delays and lower fill rates

FINRA alleges that, between January 2014-May 2019, Deutsche Bank Securities owned and operated an alternative trading system (ATS) known as SuperX, which would first take customers’ marketable orders before routing any part of the order to an exchange, unless customers opted out of this routing preference, called “SuperX ping.”

This routing preference created an inherent delay for orders that were not fully executed in the firm’s ATS, thus subjecting orders to potentially lower fill rates.

The broker did not modify its routing arrangement despite a review by its best execution committee that found lower fill rates in SuperX.

The firm’s supervisory system was not reasonably designed to achieve compliance with its best execution obligation because the firm failed to reasonably review certain factors set forth in the rule.

“Best execution of customer orders is one of FINRA’s core focus areas, and we closely monitor and review member firms’ compliance with this important component of investor protection and market integrity,” said Stephanie Dumont, Executive Vice President, Market Regulation and Transparency Services, whose department’s referral led to the enforcement action.

Deutsche Bank Securities consented to the entry of FINRA’s findings without admitting or denying them.

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