SpeedTrader, Inc (fka Mint Global Markets, Inc.)

SpeedTrader, Inc (fka Mint Global Markets, Inc.) was censured for failing to comply with its best execution obligations. The findings stated that other than considering transaction costs when initially selecting a venue, the firm’s reviews for execution quality were limited to a manual bi-weekly review of 10 randomly selected executions to determine whether they received a price that was inferior to the National Best Bid or Offer (NBBO).

The firm’s review was unreasonable because it did not consider any execution quality factor other than price disimprovement. The firm later automated this review to include all customer executions but continued to limit its review to price disimprovement. The firm later expanded the scope of its execution quality reviews to include assessments of price improvement, execution speed, and execution size, and conducted such reviews on a security-by-security and order type basis. However, the firm still did not consider the likelihood of execution of limit orders, transaction costs, customer needs and expectations, and the existence of payment for order flow arrangements.

 In addition, the firm failed to reasonably review the impact its net trading arrangements with broker-dealers had on execution quality.

The findings also stated that the firm routed customer orders totaling approximately 100 million shares annually to other broker-dealers that engaged in net trading activity, and thereby interjected these broker-dealers between itself and the best market for the subject securities.

The findings also included that the firm failed to establish, maintain, and enforce a supervisory system, including WSPs, reasonably designed to achieve compliance with its best execution obligations. The firm’s supervisory reviews relied upon unreasonably small samples of executions, failed to consider all execution quality factors, and failed to consider whether the firm could obtain better execution quality by routing to competing markets.

 In addition, the firm did not conduct any supervisory review to determine whether its net trading arrangements impacted execution quality. When the firm revised its WSPs to provide that it should consider the other execution quality factors to assess the existing order routing and execution arrangements and those of other markets, the WSPs failed to describe how reviews for the additional factors should be conducted, including what execution quality statistics should be considered.

The WSPs were similarly devoid of any guidance for determining the circumstances in which the firm should modify its order routing arrangements.

 When the firm further revised its WSPs to describe how to review for certain execution quality factors, those procedures still did not address how to review for the likelihood of execution of limit orders, transaction costs, customer needs and expectations, and payment for order flow arrangements.  

Further, the revised WSPs did not provide guidance concerning the circumstances for modifying of Regulation NMS by failing to disclose material aspects of its relationship with markets to which it routed orders in its quarterly reports. FINRA also found that the firm failed to establish and implement a written AML program that was reasonably designed to achieve and monitor the firm’s compliance with the requirements of the Bank Secrecy Act and its implementing regulations.

The firm failed to take reasonable steps to investigate red flags of suspicious activity and failed to establish and implement policies and procedures reasonably designed to detect patterns of potentially suspicious or manipulative trading, and to conduct ongoing monitoring to identify and report suspicious transactions.