The Investor’s Watchdog

The Investor's Watchdog

Virtu Americas Censured and Fined by FINRA to Resolve Allegations of Numerous Securities Industry Violations

Wednesday, February 26, 2020

Virtu Americas LLC (f/k/a KCG Americas LLC), a brokerage firm headquartered in New York City, recently consented to sanctions imposed by the Financial Industry Regulatory Authority (FINRA) Department of Enforcement to resolve alleged violations of securities industry rules. Virtu America’s business includes trading in over-the-counter and listed securities as a market maker. The firm has approximately 307 registered representatives in six branch offices.

According to the AWC, the firm implemented policies and procedures that failed to reasonably avoid displaying, or engaging in a pattern or practice of displaying, locking or crossing quotations in over-the-counter (OTC) Equity Securities. FINRA defines crossing quotation as “the display of a bid for an OTC Equity Security at a price higher or lower than the displayed price of an offer for such OTC Equity Security in the same inter-dealer quotation system.” Similarly, the term “locking quotation” refers to displaying a bid for OTC Equity Security at a price that equals the displayed price of an offer for an OTC Equity Security in the same inter-dealer quotation system.

FINRA also requires that firms must display customer limit orders no longer than 30 seconds after receipt under normal market conditions. FINRA asserts that Virtu Americas’ automated system to display these orders would drop into a trader’s queue pending manual action or were excluded from automation based upon risk criteria specified by the firm. In a sample of 232 customer limit orders reviewed by FINRA that were received by the firm from January 1, 2015 to March 31, 2018, 156 of those instances would have improved the market’s price or represented more than a trivial size change, but the firm failed to display the order with immediacy.

Between January 2015 and December 2017, FINRA reviewed a sample of 190 of the firm’s quotations that locked or crossed the market OTC Equity Securities and found that 54 of these quotations, or 28.4% of the total, violated the firm’s policies and failed to send an OTC Link message to the market participant whose quote was locked or crossed before the quotation was displayed.

FINRA claims that Virtu Americas also mismarked the capacity code on over one million transaction reports for one customer. The reports should have been marked to represent a principal transaction but instead were marked to represent an agency transaction. This causes inaccurate reporting of the required trade information and has the potential to impact FINRA’s surveillance patterns.

The firm also claims that between January 2017 and March 2017 and April 2017 through September 2017, the firm failed to report 37 transactions and 198 transactions, respectively, in TRACE-Eligible Agency Debt Securities to TRACE within 15 minutes of the Time of Execution, as required by FINRA Rule 6370(a). Additionally, on some of these transactions, the firm failed to report the correct time of execution to TRACE. Finally, FINRA claims that the firm failed to perform any supervisory review for its compliance with TRACE report requirements including timeliness and accuracy of reporting.

According to the FINRA AWC, Virtu Americas violated FINRA Rules 6437, 6460, 6730(a), 7230A(d) and 2010. Without admitting or denying the allegations made against it, Virtu Americas consented to a censure and fine totaling $250,000.

Did your broker’s bad advice cost you money? If so, contact us at 1-877-410-8172 for a free consultation. We may be able to help you recover your losses.

Author: Jason T. Albin

Jason Albin is an Attorney and Partner at ChapmanAlbin, the investor rights law firm. He has represented hundreds of investors who have lost money due to broker misconduct, unsuitable investment advice and fraud.​ Jason also represents individuals in “whistleblower” suits filed against unscrupulous companies that try to defraud the US federal and state governments.

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