StoneX Financial Inc., formerly known as INTL FCStone Financial Inc, has agreed to pay a fine of $60,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
This matter originated from FINRA’s OTC Limit Order Display Rule Sweep, which monitors member firms’ compliance with FINRA Rule 6460 and focuses on customer limit orders that, upon receipt, were not immediately fully displayed, routed, executed, or canceled.
StoneX failed to fully and immediately, display, route, execute, or cancel customer OTC limit orders.
During the third quarter of 2017 and the second quarter of 2018, StoneX operated a trading desk where traders were required to handle some order flow manually, outside of automated systems, resulting in delays in the handling of certain OTC orders. As a result, StoneX failed to fully and immediately display, route, execute, or cancel 27 out of 35 (77%) of sampled customer limit orders, 14 of which were cancel/replace orders. These 14 cancel/replace orders were 100% of the cancel/replace orders in the sample. Therefore, Respondent violated FINRA Rules 6460 and 2010.
From July 2017 through June 2018, StoneX failed to reasonably supervise for compliance with FINRA Rule 6460. Although the firm utilized exception reports to identify limit orders that were displayed more than 30 seconds after the order became eligible, the exception reports failed to capture cancel/replace orders. Therefore, StoneX violated FINRA Rules 3110(a) and 2010.
In addition to that, from July 2017 through June 2018, StoneX failed to establish written procedures reasonably designed to achieve compliance with FINRA Rule 6460. While the firm’s procedures required a supervisory review of orders for compliance with FINRA Rule 6460, the firm’s written procedures failed to provide reasonable guidance and instructions to supervisors as to how to conduct such reviews. Therefore, Respondent violated FINRA Rules 3110(b) and 2010.
On top of the $60,000 fine, StoneX has agreed to a censure.