UBS Securities LLC

UBS Securities LLC was fined a total of $250,000 for providing market access to two affiliates without accounting for those affiliates in its financial risk management controls.

The findings stated that the firm maintained a proprietary order management system that it and its affiliates used for trading in listed futures and options. In addition, the firm maintained a third-party order management system that it and its affiliates used primarily to enter good-till-cancelled spread orders.

The firm established credit thresholds and erroneous order controls based upon its mistaken belief that the options orders entered through both order management systems were entered by a single firm affiliate. In fact, a firm employee was able to enter orders on behalf of two additional firm affiliates into both order management systems. The firm did not establish any credit thresholds or erroneous order controls with respect to the two affiliates.

The findings also stated that the firm failed to establish, maintain, and enforce a reasonably designed supervisory system concerning the documentation of the review of credit limits changes. The firm’s market access procedures provided guidance concerning requests for customer credit limits changes and supervisory approval of such changes.

The firm’s supervisory system for reviewing credit limits changes was unreasonable because the system for documenting approvals of changes to customer credit limits in some cases permitted increases to customer credit limits without documenting a valid reason for the approval. The findings also included that the firm failed to establish, maintain, and enforce a reasonable supervisory system concerning the documentation of the review of soft blocks.

The firm’s market access procedures provided that if an erroneous order control triggered a soft block, the personnel reviewing the order must consider one or more factors specified in the procedures, as relevant, and, if overriding the soft block, document the reason for resuming the order and allowing it to proceed to the market. However, the firm’s supervisory system for reviewing resumed orders was unreasonable because the system for documenting the resume reason offered a limited selection of reasons for allowing the order to proceed that did not capture the specified factors in the firm’s procedures.