Nasdaq fines SpeedRoute $450,000 for numerous erroneous orders

Rick Steves

“As a gatekeeper providing access to our market for its clients, SpeedRoute plays a critical role in protecting investors and market integrity”

Nasdaq index 5000 pts

Nasdaq has censured SpeedRoute, a leader in U.S. Equity order routing and market structure which provides broker-dealer clients access to trading on Nasdaq and other exchanges, for violating various provisions of Rule 15c3-5 of the Securities Exchange Act of 1934 (known as the Market Access Rule) over a nearly five-year period, from January 2017 through November 2021.

According to Nasdaq, SpeedRoute failed to prevent the transmission of numerous erroneous orders, resulting in the filing of 30 clearly erroneous execution petitions. Nasdaq fined the firm $450,000.

SpeedRoute violated the Market Access Rule

Between January 2017 and November 2021, SpeedRoute executed millions of trades totaling billions of shares on Nasdaq alone, but seems to have failed to establish, document, and maintain a system of risk management controls and supervisory procedures reasonably designed to prevent the entry of erroneous orders from clients and to prevent the entry of orders that exceed appropriate pre-set credit thresholds for clients.

Nasdaq alleged SpeedRoute also failed to establish a system for regularly reviewing its risk management controls and for conducting the annual review and certification required by the Market Access Rule.

According to the venue, an erroneous system setting and an error in market data integration were part of the reason for the failure to apply certain erroneous order controls and all of its credit limit controls, but SpeedRoute eventually found these controls were not functional in the fourth quarter of 2018.

The firm, however, continued to send orders to Nasdaq before fully resolving the issue, failed to establish additional controls or safeguards to control the risks involved, or did not alert Nasdaq, the exchange operator stated.

Nasdaq acts as a self-regulatory organization since 2019

John Zecca, Chief Legal & Regulatory Officer of Nasdaq, said: “As a gatekeeper providing access to our market for its clients, SpeedRoute plays a critical role in protecting investors and market integrity. In this case, SpeedRoute failed in its obligations for an extended period of time and as a result we are holding the firm accountable.”

Nasdaq acts as a self-regulatory organization required by the Securities Exchange Act of 1934 to enforce its broker-dealer members’ compliance with federal securities laws and rules as well as its own rules.

Nasdaq’s Investigations and Enforcement Department has assumed responsibility for certain investigative and enforcement functions on Nasdaq’s equities and options markets since 2019. Previously, this work had been performed by FINRA.

 

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.”

Technology

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.

Technology

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.

Opinion

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

<