Trading Firm Settles NYSE Arca Charges For Deficient Controls

A proprietary trading firm settled NYSE Arca charges for risk management failures as to controls over erroneous orders and capital limits.

According to the Letter of Acceptance, Waiver and Consent, the firm did not reasonably design its order controls to prevent the execution of orders entered materially away from the last price of a security. The firm's warning system allowed traders to "click through" price variation warnings without guidance on when it would be appropriate to do so or records of such events. Furthermore, the firm's risk management controls did not prevent orders that exceeded preset capital thresholds. As a result, the firm violated risk management requirements under Exchange Act Rules 15c3-5(b) and 15c3-5(c)(1)(i)-(ii), as well as NYSE Arca Rule 11.18 ("Supervision"). The firm also violated Exchange Act Rule 15c3-5(e) for being unable to produce documentation of its market access controls annual reviews.