GFI Securities agrees to $50,000 fine as a part of settlement with FINRA

Maria Nikolova

From November 2014 to August 2018, GFI failed to maintain a system of risk management controls and supervisory procedures to manage risks related to the provision of access to an ATS.

Broker-dealer GFI Securities LLC has agreed to pay a fine of $50,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

GFI provides its clients with access to to an alternative trading system (ATS). From November 2014 to August 2018 (the “Relevant Period”), GFI failed to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to manage the financial, regulatory and other risks of this business activity.

During the Relevant Period, GFI’s customers routed equity orders to GFI’s traders, who then routed certain of those trades directly to the ARCA or NASDAQ market. For those trades which GFI routed directly to the market, it used a third-party Order Management System (OMS) to manage the equity trading. In addition, during the Relevant Period, GFI also operated an ATS, CreditMatch. Broker-dealers, banks and non-broker-dealers subscribed to CreditMatch, which operated sessions where interested buys and sells were matched.

According to the findings stated in the settlement, during the Relevant Period GFI failed to document its system of risk management controls and supervisory procedures reasonably designed to manage the risk of this business activity, as required under SEA Rule 15c3-5(b). At times during the Relevant Period the Firm’s written supervisory procedures for its Market Access Rule compliance for those trades that it directed to the market through the OMS consisted only of the “off-the-shelf” OMS manual, which identified the various risk management controls available through the OMS.

In addition, at times during the Relevant Period GFI’s market access written supervisory procedures specific to CreditMatch contained only a description of available controls that customers subscribing to the ATS could set. While the firm subsequently revised its written procedures during Relevant Period for both the trades directed to the market through the OMS as well as for CreditMatch, those revisions included only general Market Access Rule requirements and failed to document the firm’s own system of risk management controls and supervisory procedures specifically tailored to those systems.

In addition, from November 2014 to August 2017 GFI established a daily trading capital limit for its equity trading, but failed to document the basis or rationale for that determination. As a result, the firm violated SEA Rule 15c3-5(b).

GFI also failed to establish risk management controls and supervisory procedures reasonably designed to prevent the entry of orders that exceeded appropriate pre-set credit thresholds in the aggregate for each of its customers, as required under SEA Rule 15c3-5(c)(1)(i).

Further, during the period from November 2014 to October 2015, GFI failed to implement systematic pre-trade credit limits for its non-broker-dealer customers in CreditMatch. As a result, the Firm violated SEA Rule 15c3-5(c)(1)(i).

Finally, the Firm failed to conduct an annual review in 2014 to assure the overall effectiveness of its risk management controls and supervisory procedures with respect to CreditMatch, and failed properly to complete the required certification for 2014 that such risk management controls and supervisory procedures complied with SEA Rule 15c3- 5(b)and(c). Thus GFI violated SEA Rule15c3-5(e)(1) and (2).

On top of the fine, GFI has agreed to a censure.

Read this next

Digital Assets

Revolut receives FCA’s go-ahead to launch crypto trading

British fintech and banking firm Revolut has received a regulatory go-ahead to launch its cryptocurrency services in the UK.

Digital Assets

GBTC share is trading at 36% below bitcoin spot price

Grayscale Bitcoin Trust share has widened its discount relative to the underlying cryptocurrency held in the fund, the highest margin ever since its debut in 2013. Digital Currency Group’s flagship GBTC shares traded at a discount of 35.8% to net asset value (NAV) today.

Digital Assets

Crypto lender Nexo investigated by 8 US state regulators

State securities regulators in New York, California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont are investigating crypto lender Nexo for allegedly failing to register its Earn Interest Product.

Metaverse Gaming NFT

Astar Network’s ad features 329 top brands to support Web3 in Japan

Blockchain innovation hub Astar Network is making strides in promoting the Web3 adoption worldwide. In yet another milestone, the smart contracts platform has run a national newspaper ad in Japan that set a new global record with participation from 329 blue-chip firms.

Digital Assets

Pyth Network welcomes onchain data from crypto market maker Auros

“By sharing our high-frequency trading data with a truly onchain decentralized network, we aim to foster innovation that will lead to better financial solutions for all participants.”

Digital Assets

Tokeny integrates Ownera to boost liquidity of tokenized assets

“The adoption of FinP2P will result in higher liquidity and better access to capital and assets by providing regulated firms with one secure point of connection to multiple digital asset networks across the globe.”

Digital Assets

BingX launches subsidy vouchers to cover user losses in copy trading

“With the introduction of copy trade subsidy vouchers, new users can easily try out trading strategies without incurring losses.”

Digital Assets

Talos expands sales team: Frank van Zegveld, Matt Houston, Hillary Conley

“The extensive leadership and industry expertise of these new hires will enable us to build long-lasting relationships as we continue to build out our global presence in EMEA and beyond.”

Executive Moves

FX and CFD broker Emporium Capital hires industry veteran Robert Woolfe as COO

His past experience within the FX and CFD industry includes top roles at Capital Index, London Capital Group, GKFX, ETX Capital, and IG.  “I’m delighted to be part of the Emporium Capital team and spearheading the brokerages global expansion plans”, he said about the appointment.

<