U.S. regulators are sanctioning Barclays Capital Inc. for funnelling clients’ orders to its own alternative trading system, thereby failing to meet its best execution obligations.
Without admitting or denying the allegations, Barclays consented to the findings of the U.S. Financial Industry Regulatory Authority Inc. (FINRA), which fined the firm US$2 million.
Among other things, FINRA found that the firm routed all of its clients’ marketable orders to the alternative trading system, LX (which it operated from January 2014 through February 2019) before sending these orders to any competing trading venue, unless customers opted out of this routing preference.
“Barclays Capital failed to conduct reasonable reviews of execution quality for its customers’ orders,” the self-regulatory organization said, adding that it failed to “consider alternate routing arrangements even when the firm’s own data showed that fill rates in LX were inferior to fill rates at some competing venues.”
In a release, FINRA stressed the importance of broker-dealers’ compliance with best execution requirements.
“Firms must continuously monitor their reviews of execution quality and make changes accordingly,” said Jessica Hopper, executive vice president and head of enforcement at FINRA.