According to FINRA, Clear Street LLC was censured and fined $175,000 for routing options orders with inaccurate origin codes and for failing to reasonably supervise the accuracy of these codes.

The firm routed options orders for execution with incorrect origin codes, resulting in 988,170 options contracts being executed with an origin code of "Customer" when they should have been coded "Professional Customer." This distinction is significant because professional customers are subject to different pricing and priority rules than retail customers on options exchanges. Professional customers typically receive less favorable pricing than retail customers, as exchanges often provide price improvement incentives for retail order flow.

By incorrectly coding professional customer orders as retail customer orders, Clear Street's orders may have received more favorable treatment than appropriate, potentially disadvantaging other market participants. The inaccurate origin codes were also reflected in the firm's order memoranda, which are required records that document order details.

Beyond the inaccurate coding itself, FINRA found that Clear Street failed to reasonably supervise the accuracy of its options order origin codes. The firm used a report generated by a third-party post-trade surveillance platform to supervise origin code accuracy. However, this report was fundamentally flawed—it did not accurately reflect the firm's trading activity because it failed to correctly count multi-leg options orders. Multi-leg orders involve the simultaneous purchase and sale of multiple options contracts and are common in options trading strategies.

The firm's reliance on an inaccurate surveillance report meant it could not effectively detect origin code errors. Only after FINRA alerted the firm to the issue did Clear Street remediate this supervisory deficiency.

Options origin codes are essential for fair and orderly markets. They ensure that different categories of market participants receive appropriate treatment and pricing. When firms misclassify orders, it can distort market dynamics and create unfair advantages.

This case underscores the importance of firms validating their surveillance tools and ensuring they accurately capture trading activity before relying on them for supervisory purposes.