The firm failed to specify certain material aspects with respect to payment for order flow arrangements for various quarters between 2008 and 2016.
State Street Global Markets, LLC has agreed to pay a monetary sanction of $75,000 as a part of a settlement with the United States Financial Industry Regulatory Authority (FINRA).
Staff in Market Regulation’s Trading and Financial Compliance Examinations section conducted a 2016 TFCE Cycle Examination of certain equity trading activity at State Street Global Markets, primarily for trade date February 9, 2016. The examination found that although State Street Global Markets reported its maker-taker model payment for order flow arrangements with its top routing venues, which included other broker-dealers and U.S. equity exchanges, it failed to specify certain material aspects (specifically, amounts per share or per order) with respect to those payment for order flow arrangements for various quarters between 2008 and 2016.
From October 2008 through September 2016, in 22 non-consecutive quarters, while State Street Global Markets disclosed generally that it had payment for order flow arrangements with four venues to which it routed non-directed orders for execution, it failed to report the material aspects of those relationships. Specifically, State Street Global Markets failed to report the payment amounts per share or per order that it received from the four venues identified in its quarterly
reports published pursuant to Rule 606. State Street Global Markets believed, incorrectly, that Rule 606 did not require disclosure on a per share or per order basis of payments received.
Due to this conduct, the firm violated Rule 606, FINRA Rule 2010 and NASD Rule 2110.
Furthermore, from October 2008 through September 2016, State Street Global Markets’ supervisory system, including its written supervisory procedures (WSPs) , were not reasonably designed to achieve compliance with Rule 606. Specifically, State Street Global Markets’ WSPs related to Rule 606 focused exclusively on the compilation and publication of the Rule 606 quarterly reports. The supervisory system lacked any procedures, written or otherwise, that required a review of the accuracy or completeness of the information provided in its quarterly Rule 606 reports, including a review of its payment-for-order-flow disclosures. As such, its supervisory system was not reasonably designed to review for the material aspects as required. State Street Global Markets has since updated its WSPs related to compliance with SEC Rule 606.
Thus, the firm violated FINRA Rules 3110(a) and (b) and 2010, and NASD Rules 3010(a) and (b) and 2110.
On top of the fine, State Street Global Markets also agrees to a censure.