FINRA fines Virtu Americas for failure to provide best execution

Maria Nikolova

During the period of September 1, 2015 through August 21, 2017 Virtu failed to provide best execution with respect to 13,136 customer orders.

Virtu Americas LLC (f/k/a KCG Americas LLC) has agreed to pay a fine of $175,000 as a part of a settlement with the United States Financial Industry Regulatory Authority (FINRA).

The rule violations occurred during the period of September 1, 2015 through August 21, 2017. During the Review Period, Virtu failed to provide best execution with respect to 13,136 orders it had received that were customer orders of another broker-dealer, by failing to use reasonable diligence to ascertain the best market for the subject securities and by failing to buy or sell in such market so that the resultant prices to the customers were as favorable as possible under prevailing market conditions.

Specifically, on September 1, 2015, the firm began accepting orders for execution outside of normal trading hours, as early as 4:00 a.m. Normal trading hours are from 9:30 a.m. until 4:00 p.m. ET. At the request of two of its broker-dealer clients, the firm accepted orders that were routed earlier than 8:00 a.m. and 8:15 a.m. respectively, but delayed the release of these orders for execution until 8:00 a.m. and 8:15 a.m. respectively (“hold and release” orders).

The firm’s order management system is designed to handle hold and release orders by first crossing any buy and sell orders that were marketable against each other at the midpoint of the National Best Bid and Offer (NBBO), and then, once the crossing process is completed, hold and release orders were released for execution by the firm’s electronic market making systems.

During the Review Period, due to a programming error in the firm’s order management system, certain hold and release orders were executed by the firm’s electronic market making systems prior to the completion of the crossing process. The hold and release orders were received and executed outside of normal trading hours, and were marketable against each other and designated by each customer for execution at the same time, but were not executed against each other at the NBBO midpoint. Instead, the firm executed such eligible buy and sell orders separately, on a principal basis, at the NBBO or a price that was better than the NBBO but that was at prices less favorable than the NBBO midpoint.

This programming error affected 13,136 hold and release orders, all of which were entered by two of the firm’s broker-dealer clients. The difference between the execution price of the 13,136 orders and the NBBO midpoint at the time of each order’s execution amounted to $164,137.70 in customer harm.

The firm took corrective action by implementing a temporary fix on August 21, 2017, and thereafter permanently fixed the programming error at the end of 2017.

FINRA notes that the firm paid full restitution to the two introducing broker-dealer clients affected by the programming error during the Review Period.

During the Review Period, the firm failed to establish and maintain a supervisory system designed to achieve compliance with FINRA Rule 5310 for customer orders executed outside of normal trading hours in violation of FINRA Rules 3110 and 2010.

On top of the fine, Virtu agrees to a censure.

Read this next

Inside View

Broadridge report finds 27% of firms’ overall IT budget goes to digital transformation

“A new chapter in digital transformation is emerging. In our work with clients across the financial services industry we see leading firms are already reaping the benefits from digitalization and the use of technologies such as AI and blockchain/DLT, as they adapt to economic headwinds and new competitive dynamics”

Executive Moves

Ripple announces Monica Long as President

“I’m incredibly honored to take on the role of President at Ripple as we expand deeper into crypto-enabled services like liquidity, settlement and custody.”

Executive Moves

Arabesque AI appoints Carolina Minio Paluello as CEO

“Arabesque AI is uniquely positioned to service the asset management industry’s need to meet the growing market demand for hyper customised portfolios.”

Industry News

SEC Commissioner Mark T. Uyeda says standardized ESG measures are doomed to fail

“Because ESG ratings may be divorced from matters of financial materiality, they can reflect a particular political or social agenda.”

Industry News

Worldline launches digital payments suite in India

“Our low-cost innovative offering SoftPOS will empower SMBs in a big way to accept digital payments affordably.”


cTrader Web 4.5 Presents Guest Mode, Multiple Charting and Copy Improvements

Spotware has announced the release of its cTrader Web version 4.5, which comes with a whole range of features and improvements for all cTrader users.


SteelEye suggests integrated surveillance as Morgan Stanley fines employees over WhatsApp

“The use of integrated surveillance means firms can avoid unwanted regulatory attention by enabling them to self-report and self-remedy more efficiently when malpractice is flagged.”

Industry News

ASIC bans Gregory William Finerty for unlicensed FX algo trading bot

Bradford AI leased an algorithmic trading program known as ‘Robot 1’ to trade on the FX market, using an Australia-based over the counter contracts for difference (CFD) broker.


With the recent changes to St Vincent licensing, what will the future trends be for licensing in 2023?

New St. Vincent and the Grenadines regulations came as somewhat of a shock for those brokerages that are only regulated in SVG