GTS Securities

GTS Securities was fined a total of $100,000 for failing to obtain a locate in connection with proprietary short sale transactions as required by Rule 203(b)(1) of Regulation SHO.

The findings stated that the firm’s failure was attributable to a system coding issue that went undetected. The firm misidentified certain securities as easy to borrow (ETB). The firm received ETB lists from its clearing firms, however one of the clearing firms modified an electronic tag on its ETB list without notifying the firm of the modification.

The firm’s system did not recognize the modified tag, coding certain securities as ETB when they were not on the ETB list. Those executions comprised a small fraction of all short sales that the firm executed during that time period. The firm stopped using the clearing firm and, therefore, no longer relied on its ETB list for locates.

The findings also stated that the firm failed to have a reasonable supervisory system to achieve compliance with the locate requirement. The firm’s system did not include any means by which to determine if the clearing firm’s ETB lists were correctly recognized by its systems and that its locate decisions were consistent with accurate ETB information.