United States:
Floor Broker Settles NYSE Arca Charges For Disadvantaging Option Market Makers
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A broker-dealer settled NYSE Arca, Inc. (“NYSE
Arca”) charges for “failure to properly announce a
customer order” and related supervision failures. NYSE Arca
alleged that the broker-dealer allowed its customer to hedge an
option in the cash market before informing the trading crowd on the
floor of the option order.
In a Letter of Acceptance, Waiver and Consent, NYSE Arca found
that, on January 26, 2021, the firm’s phone clerk informed a
customer that its option transaction had been announced, although
the option order’s size and price were not announced to the
trading crowd. The customer conveyed this information to the
counterparty party for the option, who was then able to hedge the
option before the order was conveyed to the trading crowd on the
exchange floor. As a result, the trading crowd was not given the
opportunity to participate in the option trade under the same
conditions as the counterparty party.
NYSE Arca found that the firm’s supervisory system was not
reasonably designed to ensure that its customers would only be
informed of an order’s announcement after all of the
order’s material terms have been conveyed to the trading
crowd.
As a result, NYSE Arca found that the firm allegedly violated
NYSE Arca Rules 11.1(b) (“Adherence to Law and Good
Business Practice”) and 11.18(b) (“Supervision”).
To settle the charges, the broker-dealer agreed to (i) a
censure, and (ii) a $20,000 fine.
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