finra

FINRA

For Release:
Contacts:
Thursday, April 18, 2002
Nancy Condon
202-728-8379
Michael Shokouhi
202-728-8304

NASD Regulation Censures and Fines Interactive Brokers for Market Systems Violations

Washington, D.C. — NASD Regulation, Inc., today announced that it censured and fined Interactive Brokers, L.L.C., $230,000 for multiple violations, including order routing, Order Audit Trail System (OATS) reporting, record keeping and supervision violations. During a three-year period Interactive Brokers violated NASD rules by mis-programming its order routing system so that customer orders that were routed through Nasdaq's SelectNet system to electronic communication networks (ECNs) were treated as "non-negotiable," which means the essential terms of the order, including the size, could not be changed. NASD rules prohibit non-negotiable orders from being sent to ECNs and permit ECNs to reject them. In most cases, ECNs exercised their right to reject them, due to difficulties in programming their systems to accept this type of order.

 

Interactive Brokers also failed to submit Order Audit Trail System reports in the manner required by NASD OATS rules. Interactive Brokers' record keeping violations occurred as a result of its system programming which retained certain required details concerning its routing of orders through SelectNet for no more than one week. NASD rules require this data to be retained for three years. Interactive Brokers' OATS and record keeping violations spanned a 20-month period from August 1999 through April 2001.

 

Interactive Brokers also was ordered to revise its supervisory procedures to ensure that future computer programming changes will result in the firm's automated routing and execution system, OATS reports, and maintenance of required books and records being in compliance with NASD and SEC rules.

 

Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999 or by sending an e-mail through NASD Regulation's Web Site at www.nasdr.com.

 

The National Association of Securities Dealers, Inc. is the largest securities industry, self-regulatory organization in the United States. It is the parent organization of NASD Regulation, Inc.; the American Stock Exchange, LLC; and NASD Dispute Resolution, Inc. For more information about the NASD and its subsidiaries, please visit the following Web sites: www.nasd.com; www.nasdr.com; www.amex.com; www.nasdadr.com.