G1 Execution Services
G1 Execution Services was fined $575,000 and ordered to pay $816,618.75 in restitution for failing to provide best execution to orders from its clients on behalf of their customers in over-the-counter (OTC) securities by failing to use reasonable diligence to ascertain the best market for the subject securities and by failing to buy or sell in such a market so that the resultant prices to the customers were as favorable as possible under prevailing market conditions.
The findings stated that the firm, at times, missed better priced messages and thus did not execute the customer’s order at the best available price as a result of its manual process for comparing customer orders it received in OTC securities. The findings also stated that the firm failed to establish and maintain a supervisory system reasonably designed to achieve best execution for customer orders in OTC securities.
The supervisory system failed to account for price opportunities available through its electronic messaging service when evaluating the execution quality of the customer orders. Since the firm’s supervisory system excluded reviews of prices available in the messages, it had no way to determine if its customer orders received an inferior execution to one available via the messages.
The findings also included that the firm either failed to make reasonable efforts to execute against the market maker’s quotation within 30 seconds of receipt of the customer’s order which would have allowed the firm to display the customer limit order, or take alternative steps of immediately routing, executing or canceling the customer order for orders that would have locked or crossed the firm’s quote or another firm’s quote.
The firm also failed to immediately display sample customer orders that did not lock or cross a displayed quote due to technology issues. FINRA found that the firm’s supervisory system was not reasonably designed to achieve compliance with limit order display obligations because its daily exception reports did not include orders that would have locked or crossed the market, orders that had an initial action taken within 30 seconds or orders that were received before a specific time. As a result, orders that could lead to violations were not being reviewed.
