SpeedTrader has agreed to settle charges with the Financial Industry Regulatory Authority (FINRA). The settlement includes a $165,000 fine, with $13,200 allocated to FINRA and the remainder distributed among EDGX, Nasdaq, and NYSE Arca.

From November 2017 to January 2020, SpeedTrader had serious deficiencies in its supervisory systems and risk management controls. The firm relied on an automated third-party surveillance system to detect potentially manipulative trading practices. However, the system parameters were not appropriate according to the firm’s specific business model or customer base, and no periodic reviews of these parameters were available.

SpeedTrader Settle Charges with FINRA: $165,000 Settlement for Violations

Additionally, SpeedTrader’s practices for tracking and investigating exception alerts were inadequate. The firm used a single trader identification number per account, hindering its ability to pinpoint which individual traders were generating alerts. Investigations into alerts were often superficial, with repetitive and misguided closing comments that failed to address the underlying issues of trading patterns.

The firm also neglected to implement effective financial risk management controls. Instead of setting appropriate credit thresholds for its customers, SpeedTrader relied on its clearing firms without documenting how these thresholds were determined or whether they were regularly assessed and adjusted.

These lapses led to violations of FINRA Rules 3110 and 2010, as well as various provisions of the Exchange Act. The settlement underscores the importance of robust and tailored supervisory procedures and risk management controls in maintaining market integrity and compliance.

SpeedTrader has committed to making improvements in its compliance framework as part of the settlement agreement.

The settlement between SpeedTrader, Inc. and FINRA highlights critical lapses in the firm’s supervisory and risk management practices. The fine of $165,000 serves as a stark reminder of the importance of financial firms maintaining rigorous and tailored controls to prevent manipulative trading practices and manage financial risk effectively. SpeedTrader’s commitment to addressing these issues is a necessary step toward enhancing compliance and ensuring the integrity of its market activities. 

Also, stay updated with the Latest Broker News.