The Bourse de Montréal Inc. (MX) has sanctioned Morgan Stanley & Co. LLC for market access violations.
The disciplinary committee of the exchange approved a proposed settlement that requires the firm to pay $95,000 in penalties and $6,100 in costs to resolve allegations that it violated the exchange’s rules by providing access to its electronic trading system to 16 employees without the prior approval.
According to the settlement, the violations, which occurred between June 2018 and February 2022, were first uncovered in a compliance review by the exchange. The firm also self-reported additional instances of unapproved access.
“By sending orders to the algorithms used by [Morgan Stanley], employees could route orders to many different exchanges. Those algorithms did not utilize exchange-specific entitlements. Therefore, employees who traded solely through the algorithms were able to enter orders and trades to the Bourse without prior approval,” it noted.
The settlement also found that the firm failed to establish supervisory procedures to prevent the exchange access violations.
“In cases when an employee traded solely through an algorithm, [Morgan Stanley] did not appear to have established and maintained a system that was reasonably designed to achieve compliance with the rules and policies of the Bourse,” it said.
The settlement noted that the firm has since revised its trading algorithms to ensure that only approved employees access its systems or place orders. It also enhanced its reviews of daily trading activity to quickly identify and resolve any instances of unapproved access.