BGC Financial, L.P.

BGC Financial was fined $50,000 for failing to include two proprietary accounts in calculations of its overall net position in equity securities (e.g., “short” or “long”) being sold, which ultimately caused certain orders to be mismarked under Regulation SHO Rule 200(g) of the Securities Exchange Act of 1934.

The findings stated that this occurred because the firm aggregated the accounts into independent trading units, even though it did not create a written plan of organization that identified the aggregation units, specified their trading objectives, and supported their independent identities, pursuant to Regulation SHO Rule 200(f)(1).

As a result, proprietary accounts did not qualify for independent treatment, and the firm’s order management system incorrectly excluded their positions when calculating the firm’s net position in securities, resulting in the firm mismarking trades.

The findings also stated that the firm failed to establish, maintain, and enforce a supervisory system reasonably designed to achieve compliance with Rule 200(f) and (g).

The firm did not take any steps to verify that its order management system was achieving compliance with Regulation SHO. For example, the firm did not conduct regular order-marking reviews.

In addition, the firm’s WSPs did not contain descriptions of any process to ensure compliance with Rule 200 and did not identify any individual responsible for such compliance.

Following FINRA’s cycle examination, the firm undertook an internal audit of its trading desks, implemented new procedures for reviewing order marking, revised its WSPs, and modified its procedures to include written plans of organization for the desks.