Nasdaq fines SpeedRoute $450,000 for numerous erroneous orders
“As a gatekeeper providing access to our market for its clients, SpeedRoute plays a critical role in protecting investors and market integrity”
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.