A broker-dealer settled NYSE Arca charges for (i) mishandling a customer options order by failing to document the order as a tied hedge transaction and prematurely informing the customer of the order's announcement, and (ii) failing to supervise the handling of tied hedge transactions.
As covered in its Letter of Acceptance, Waiver and Consent, NYSE Arca found that the broker-dealer, during an open outcry, did not "represent the order as a tied hedge order to the crowd" and also failed to record the order as a tied hedge order, in violation of Commentary .01 to NYSE Arca Rule 6.47A-O ("Order Exposure Requirements - OX"). Further, NYSE Arca stated that the broker-dealer improperly informed the customer of the order's announcement before the terms of the order had been disclosed and before the stock hedge had been completed for the tied hedge order, in violation of NYSE Arca Rule 11.1(b) ("Adherence to Law and Good Business Practice").
In addition, NYSE found that while the broker-dealer had written supervisory procedures ("WSPs") in place, the broker-dealer did not sufficiently ensure that its personnel understood the requirements set out in the WSPs, in violation of NYSE Arca Rule 11.18(b) ("Supervisory System").
To settle the charges, the broker-dealer agreed to (i) a censure and (ii) a $7,500 fine.
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