StoneX Financial has agreed to a settlement with the Financial Industry Regulatory Authority (FINRA), paying a $70,000 fine and accepting a censure following allegations of inadequate best execution practices. The settlement also includes restitution of $27,074.36 plus interest.

The issues in question span from July 2017 to March 2020, during which StoneX Financial acted as a market-maker for over-the-counter (OTC) securities, including those listed on OTC Link LLC, previously known as the “Pink Sheets.” The firm had access to an electronic messaging service enabling market-makers to exchange information about buying and selling specific securities.

StoneX Financial Settlement with FINRA for $70,000 

Despite having this technology, StoneX Financial’s manual processes led to significant lapses in execution quality. Specifically, the firm failed to integrate OTC Link messages into its order management system. This oversight meant that StoneX Financial did not always execute orders at the most favorable prices available. For instance, on one occasion, the firm received a limit order to buy 2,000 shares at $0.85 each but executed the order at $0.84 per share, neglecting a better price of $0.786 offered through an OTC Link message.

As a result of these practices, StoneX Financial did not meet its best execution obligations for 1,674 OTC securities orders, failing to use reasonable diligence to achieve the best market prices. Additionally, the firm’s supervisory system did not account for price opportunities from OTC Link messages, undermining its ability to monitor execution quality.

The settlement requires StoneX Financial to enhance its systems to ensure compliance with best execution standards moving forward. This resolution underscores the importance of integrating available market information to meet regulatory obligations.

This case underscores the necessity for market-makers to diligently integrate all available market information and adhere to best execution practices to safeguard fair trading practices and protect investor interests. The resolution also serves as a reminder to other market participants of the regulatory expectations surrounding execution quality and supervisory oversight.

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