Barclays has been hit with a $2 million fine by the Financial Industry Regulatory Authority (FINRA) for best execution violations.
According to the watchdog, the bank failed to conduct reasonable reviews of execution quality for its customers’ electronic equity orders.
FINRA found that between January 2014 and February 2019 Barclays Capital routed all of its customers’ orders to its owned and operated alternative trading system, LX, prior to routing to any competing venues unless customers had opted out of this routing preference.
The watchdog said the bank – even when faced with internal data that showed that fill rates in LX were “inferior” to some competing venues – failed to consider alternate routing arrangements. Said reports reportedly showed that LX delivered a lower fill rate than the average fill rate of competing venues for every quarter from 2015 to the first quarter in 2019.
Elsewhere, the bank was found to have a supervisory system and written supervisory procedures that were not “reasonably designed to achieve compliance with best execution obligations” when reviewing price improvement for orders routed to LX or modifying routing practices.
“FINRA continues to prioritise broker-dealers’ compliance with best execution requirements when handling their customers’ orders,” said Jessica Hopper, executive vice president and head of FINRA’s Department of Enforcement. “Firms must continuously monitor their reviews of execution quality and make changes accordingly.”
Barclays settled this matter without admitting or denying FINRA’s findings.