The Financial Industry Regulatory Authority (FINRA), the largest independent regulatory authority in the US, has given a $3.25 million fine to Deutsche Bank Securities Inc., after the group failed to give uniform information to clients of its Alternative Trading System (ATS), per a FINRA filing.
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An ATS constitutes a trading venue that executes securities trades on behalf of broker-dealers. However, it is in accordance with the Securities and Exchange Commission (SEC) Regulation that ATS operators provide “identical access to all services and features”. For its part, Deutsche Bank Securities failed to comply with this, prompting a fine from the regulator.
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In particular, Deutsche Bank Securities did not adequately disclose to its clients the availability of certain ATS services and features – this entailed the ability to include or exclude counterparties or groups of counterparties against whom orders would execute, which was flagged by FINRA.
No Evidence of Inappropriate Sharing
Consequently, a number of ATS clients, including some high-frequency trading (HFT) firms, had requested and received select services that others may not have known were available, which was in direct violation of the SEC mandate. While the nature of this sharing was not inappropriate, nor confidential information, the issue stemmed from the fact that not all users were given identical access to all services offered by the ATS.
As such, FINRA has hit Deutsche Bank Securities with a $3.25 million fine. The group has agreed to settle, however it neither admitted nor denied the charges despite consenting with the order.
According to Thomas Gira, Executive Vice President of FINRA’s Market Regulation Department, in a recent statement on the fine: “ATSs are significant and important trading venues in today’s equity marketplace. Broker-dealers that operate an ATS must provide complete and accurate information to their customers regarding access to the ATS’s services and features to ensure that customers using the trading platform are not disadvantaged.”