According to FINRA, Jefferies LLC was censured and fined a total of $200,000 on January 11, 2022, for failing to take reasonable steps to ensure that intermarket sweep orders (ISOs) it routed met the requirements of Regulation NMS.

The firm's electronic trading desk routed orders marked as ISOs that did not meet Regulation NMS requirements because the desk failed to route additional limit orders to execute against other exchanges' protected quotes. Regulation NMS is designed to ensure that investors receive the best available price when their orders are executed across multiple trading venues. ISOs are a special type of order that allows a firm to execute immediately at one venue while simultaneously routing orders to other venues displaying better prices.

The firm's violations stemmed from multiple failures: the trading desk did not inform the firm's compliance department about routing ISOs, had no procedures for Regulation NMS compliance, failed to maintain firm-specific quotation data, and did not conduct periodic reviews to test its policies. Programming errors also caused the firm to mismark orders and fail to retain data needed for compliance reviews.

Furthermore, the firm's supervisory system was not reasonably designed to comply with trade-through rules. Even after implementing supervisory reviews, the firm only reviewed a small fraction of the ISOs it handled daily, making the supervision inadequate.

This case demonstrates that firms must have comprehensive systems to ensure order routing complies with regulations designed to protect investors from receiving inferior trade executions. Investors rely on these protections to ensure they receive fair prices for their securities transactions.