Barclays Capital Inc.

Barclays Capital Inc. was fined $350,000 for failing to apply market access controls and procedures to orders routed by one of its risk management systems because it mistakenly treated that system as not having order entry and execution capabilities.

The findings stated that the firm mischaracterized the system as not offering order entry and execution functionality and excluded the system from its Global Electronic Trading Governance and Controls Policy, which was intended to identify all firm systems that required the application of market access controls and procedures.

As a result, the firm did not apply market access controls and procedures to orders that the system generated and routed. The firm’s failure to apply market access controls and procedures to this system resulted in the firm participating in monthly Special Opening Quotations and routing orders for contracts to the market unchecked.

As a result of this failure, the firm did not prevent the entry of erroneous orders totaling $11,800,000 rather than the intended $118,000 through participation in a Special Opening Quotation on one day. This caused the firm’s Index Options Flow Derivatives Trading Desk to exceed its assigned $4 billion capital limit by approximately $8 billion.

After that, the firm temporarily stopped using the system to enter orders. The firm also characterized the system as in-scope for purposes of its Global Electronic Trading Governance and Controls Policy.

Subsequently, the firm applied market access controls and procedures to the system’s order flow.