The UK’s Financial Services Authority (FSA) has fined bulge-bracket broker Credit Suisse, electronic market maker Getco Europe and agency broker Instinet Europe a collective sum of £4.2 million for failing to provide it with accurate and timely transaction reports.
Separately, the New York Stock Exchange (NYSE) has censured and fined Goldman Sachs Execution & Clearing $200,000 for introducing orders to the exchange via direct market access that were inconsistent with its policies for odd-lots (orders below the standard size) and partial round-lots (orders which are a combination of standard-size lots and odd-lots) and failing to implement adequate controls designed to comply with the exchange’s odd-lot and partial round-lot policies.
Credit Suisse’s £1.75 million fine from the FSA relates to the period between 5 November 2007 and 20 November 2008, when it failed to submit accurate transaction reports for around 40 million transactions. Some 30 million of these were equity trades conducted on the London Stock Exchange (LSE) and a further 10 million across all asset classes the firm trades.
“We deeply regret the breach in our transaction reporting obligations. We fully cooperated with the FSA and are pleased to put this matter behind us,” said a spokesperson for Credit Suisse.
Getco Europe’s £1.4 million fine relates to the firm’s failure to report roughly 46.3 million equity transactions between 5 November 2007 and 27 March 2009.
In both Getco and Credit Suisse’s case, the problem was attributed to a third party on which the firms were relying to report LSE transactions to the FSA.
“We are pleased to have reached a resolution with the FSA and to put this matter behind us,” read a statement from Getco. “While the third party assured us that the transactions were being reported properly, it was our responsibility to ensure that was in fact the case.”
Instinet Europe’s £1.05 million fine relates to the firm’s failure to report more than 22.1 million transactions between April 2007 and June 2009 across all asset classes that the firm trades.
Unlike Credit Suisse and Getco, whose fines only applied to violations of Chapter 17 of the FSA’s supervision manual relating to the submission of transaction reports, Instinet Europe’s fine additionally related to the firm’s violation of the FSA’s Principle 2, for “failing to conduct its business with due skill, care and diligence through failing to respond appropriately to clear indications that there were issues with the effectiveness of the transaction reporting process,” and Principle 3, for “failing to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.”
“We regret the problems and have worked hard to cooperate fully with the FSA to identify and address the issues in question,” said Richard Balarkas, CEO of Instinet Europe. “We are keen to put this behind us and move on.”
The FSA said the firms cooperated fully with its investigations, resulting in a 30% discount on the fines for each. Without the discount, total fines would have been £6 million.
The regulator added that the companies have taken steps to improve their processes and resolve the errors, resubmitting reports where necessary.
The FSA requires firms to have systems and controls in place to ensure they submit accurate data for reportable transactions by close of business the day after a trade is executed. The regulator uses this data to detect and investigate suspected market abuse such as insider trading and market manipulation.
NYSE’s fine and censure of Goldman Sachs Execution & Clearing (GSEC) relates to a period from 1 December 2006 to 24 January 2008, when the firm “engaged in conduct inconsistent with just and equitable principles of trade and failed to adhere to principles of good business practice” by introducing odd-lot and partial round-lot orders in a specific name from a non-member broker dealer that constituted a pattern of day trading – thus contravening NYSE’s odd-lot rules.
Goldman Sachs declined to comment on the NYSE fine.