FINRA Censures TP ICAP's Liquidnet for Misclassifying 67 Million Orders

Liquidnet, the New York agency broker owned by TP ICAP Group, will pay $250,000 and accept a censure to settle Financial Industry Regulatory Authority (FINRA) charges that it published six years of inaccurate execution-quality reports, the regulator said in a settlement letter accepted Monday.

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It is the second time in four years FINRA has censured the firm for the same category of order-execution reporting errors. The company’s Canadian subsidiary was also fined three weeks ago after foreign stuff could pick at client orders.

Sixty-Seven Million Orders Misclassified

Between February 2018 and March 2024, Liquidnet published 74 inaccurate monthly reports under Regulation NMS Rule 605, according to FINRA's Letter of Acceptance, Waiver and Consent.

The reports cover statistical information that market centers must publish each month on how they handle and execute orders in NMS securities.

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“The firm erroneously included in its Rule 605 reports approximately v67 million orders that required special handling because the firm incorrectly classified those orders as covered orders,” FINRA said in the statement.

Treating those as standard covered orders skewed the order and execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term-quality statistics that buy-side clients, regulators, and rival venues rely on to compare execution performance.

FINRA identified the inaccuracies during a March 2023 examination of the firm. By April 2024, Liquidnet had implemented coding fixes that removed the misclassified orders from its monthly disclosures, the settlement letter said.

A Repeat of the 2022 Settlement

This is not Liquidnet's first encounter with the same rule. In February 2022, the firm consented to a $50,000 fine and a censure over 30 inaccurate Rule 605 reports filed between August 2015 and January 2018.

That earlier matter involved a different mistake, with marketable limit orders classified as inside-the-quote limit orders.

Liquidnet joins a list of broker-dealers FINRA has penalized in recent years over Rule 605 reporting failures, suggesting the regulator continues to comb monthly disclosures for misclassified orders and supervisory gaps.

In July 2022, BofA Securities was fined $325,000 for publishing 107 inaccurate Rule 605 reports between January 2014 and February 2022. The errors there involved combining order data from two market centers, MLCO and MLIX, and misclassifying orders due to technological issues.

Five months later, FINRA fined Instinet $165,000 over 54 inaccurate reports tied to its Continuous Block Cross alternative trading system, where the firm had erroneously excluded orders it incorrectly treated as subject to special handling.

Early 2023 brought a $475,000 censure for UBS Securities, which had published 41 inaccurate reports for its UBSA dark pool Dark Pool Private exchanges that are not accessible by the investing public for trading securities are known as dark pools.Dark pools are named due to their lack of transparency and occasional predatory trading practices that are performed by high-frequency traders. These exchanges originally into existence towards the end of the 1980s as a way to better facilitate block trading performed by institutional investors. Why Use Dark Pools?Dark pools are used primarily by large-scale investors who do not seek Private exchanges that are not accessible by the investing public for trading securities are known as dark pools.Dark pools are named due to their lack of transparency and occasional predatory trading practices that are performed by high-frequency traders. These exchanges originally into existence towards the end of the 1980s as a way to better facilitate block trading performed by institutional investors. Why Use Dark Pools?Dark pools are used primarily by large-scale investors who do not seek Read this Term because of a coding error that mixed parent and child orders. .