According to FINRA, BofA Securities, Inc. was censured and fined $450,000 (of which $155,000 is payable to FINRA) for failing to prevent trade-throughs of protected quotations in National Market System stocks.

A trade-through occurs when a broker executes a trade at a price inferior to the best available price displayed on another exchange. Regulation NMS Rule 611 generally prohibits trade-throughs to ensure investors receive the best available prices.

BofA Securities had systemic issues that led to multiple violations. The firm had latency issues that prevented it from executing simultaneous off-exchange trades with intermarket sweep orders (ISOs). Instead, some trades were executed one second or more after ISOs were routed. These delays were unintended consequences of programming choices in two components of the firm's electronic order management systems.

Additionally, one of the firm's systems only processed the top eight levels of quotations for each stock from each exchange. If no protected quote appeared among those top eight levels (sometimes due to prevalent odd lots), the system would not route an ISO to that exchange, resulting in potential trade-throughs.

A firm trading desk also manually executed orders outside the National Best Bid or Offer (NBBO) for customer facilitations and position transfers during market hours, resulting in trade-throughs that did not qualify for any Rule 611 exception.

Furthermore, incorrect FIX tag information caused exchanges to reject ISOs, resulting in trade-throughs without necessary ISO routing.

The firm's supervisory system and written procedures were not reasonably designed to detect these various trade-through scenarios, and it did not conduct regular surveillance of its Rule 611 compliance program.

For investors, this case demonstrates that even large, sophisticated firms can have systemic issues affecting trade execution. Best execution obligations exist to protect investors, and regulatory enforcement helps ensure firms maintain compliant systems.