Clearpool Execution Services, LLC, a registered broker-dealer, agreed to pay a fine of US $473,000 to be shared by the Financial Industry Regulatory Authority and various exchanges, to settle charges brought by the self-regulatory organization that from July 2014 through September 2016 it failed to implement and maintain an adequate system reasonably designed to detect and preclude manipulative trading in the form of layering and spoofing.
In its Letter of Waiver, Acceptance and Consent, FINRA — for itself and on behalf of all the SROs – acknowledged that Clearpool used systems to potentially block manipulative trades on a pre-trade basis and to evaluate trades for manipulative conduct on a T+1 basis. These systems generated “thousands of layering and other manipulative alerts” at FINRA, multiple exchanges and in the firm’s surveillance systems. However, Clearpool at first limited its review of suspect trades on a T+1 basis, and then, when it amended its pre-trade checks with a real-time surveillance system in February 2015, set parameters for pre-trade blocks that were too generous, claimed FINRA. In response to reports it reviewed, Clearpool terminated trading privileges of hundreds of individual traders of one customer account it carried but never terminated the account itself. FINRA said this was despite the account being subject to multiple inquiries by SROs, and other red flags.