Fenix Securities, LLC

Fenix Securities, LLC was fined $100,000 - and required to certify that it has remediated the issues identified in the AWC and implemented a supervisory system, including WSPs, and a documented system of risk management controls, including pre-order erroneous order controls, reasonably designed to achieve compliance with SEA Rule 15c3-5- for failing to establish, document, and maintain a system of risk management controls reasonably designed to manage the financial risks of its market access business activity.

The findings stated that the firm provided its customers direct access to multiple alternative trading systems (ATSs) through the firm’s order management systems. However, the firm’s pre-trade controls were not reasonably designed to prevent the entry of erroneous orders.

The firm’s single order size and price variance controls relied on static numbers that did not consider the individual trading characteristics of individual securities or customers, and that were too high to be reasonably designed to prevent the entry of erroneous orders absent additional reasonably designed controls, such as an ADV control that the firm did not have. The firm maintained no documentation of its rationale for setting those controls.

Similarly, the firm relied on a price variance control that, once triggered, routed a warning message to a firm principal but did not stop the order from being routed to the market. The firm had no policies or procedures for how the warning messages should be reviewed or how such reviews should be documented and did not document such reviews.

In addition, the firm, for some of its customers, relied on the pre-trade order price and size controls maintained by an ATS. The ATSs’ price and size controls were unreasonable, in part because they relied on static numbers that were too high to be reasonably designed to prevent the entry of erroneous orders, absent additional reasonably designed controls.

Further, the firm did not document for which customers it relied on such controls and had no process to determine or document whether such controls were reasonably designed for those customers.

Further, the firm did not maintain accurate documentation of its pre-trade market access controls implemented within its systems or documentation of its rationale for selecting its pre-trade controls on a firm-wide or per-customer basis.

The findings also stated that the firm failed to conduct an annual review of the business activity of the firm related to market access to assure the overall effectiveness of its risk management controls and supervisory procedures.

Likewise, the firm failed to complete the corresponding chief executive officer certifications that its risk management controls and supervisory procedures comply with Rules 15c3-5(b) and (c) of the Exchange Act, and that the firm conducted a review of the business activity of the firm related to market access.