FIS Brokerage
The findings stated that the firm applied both general and customer-specific pre-trade erroneous order controls to its order flow. However, the parameters of both the firm's general controls and customer-specific controls were too wide to be reasonably effective in detecting potentially erroneous orders, thus blocking them from being routed to an exchange.
Among the pre-trade controls maintained by the firm that were common to all of its customers and designed to take into account the individual characteristics of a security was an average daily volume check, which rejected market orders that exceeded a defined percentage of a security's average daily volume.
Another pre-trade control maintained by the firm that was common to all of its customers was a price deviation check. This control rejected limit orders greater than a certain percentage away from a security's National Best Bid or Offer (NBBO).
Additionally, the firm applied several controls to each customer's order flow: a credit limit; single order size; single order notional value; and order entry rate. The thresholds of these controls were based on a customer's historical trading activity and were revised quarterly. Although the firm reduced the multiplier for buying power, the maximum order shares and the maximum order notional value for onboarding new clients, these controls were not reasonably designed to prevent erroneous order entry.
Although the firm regularly reviewed its system of pre-trade controls for those accounts and tightened its order handling controls and procedures on multiple occasions, these limits were not reasonably designed to prevent firm customers from placing orders that greatly exceeded their historical trading patterns, and therefore were not reasonably designed to prevent erroneous order entry.
