According to FINRA, Barclays Capital Inc. was censured and fined $2,250,000 (with $303,000 payable to FINRA) for failing to establish adequate supervisory systems and risk management controls to monitor for potential layering and spoofing of options.

The New York firm sent millions of options orders to exchanges without any surveillance for spoofing or layering. None of the firm's surveillances for these manipulative practices included options order activity, and its written supervisory procedures did not reference surveilling options for these purposes.

The firm also failed to maintain regulatory risk management controls and post-trade execution reports that would allow surveillance of options orders routed directly to exchanges.

Additionally, the firm's surveillance parameters for detecting manipulation were unreasonably designed. The parameters required that aggregated potentially manipulative order volume be at least 20 times greater than the average trade size—a threshold the firm later lowered after recognizing that layering and spoofing can occur with smaller orders.

For equities surveillance, the firm mistakenly designated two national securities exchanges as "dark" venues instead of "lit" venues when implementing a third-party surveillance system. This error caused all equities order flow to these exchanges to be excluded from layering and spoofing surveillance.

Layering and spoofing are forms of market manipulation where traders place orders they intend to cancel before execution to create a false impression of supply or demand. These practices harm other market participants who make decisions based on what appears to be genuine interest.

The firm has since corrected the exchange designations and begun surveilling the previously excluded order flow.

For investors, market manipulation surveillance by broker-dealers helps maintain fair and orderly markets. When firms fail to monitor for manipulation, it can harm market integrity.