According to FINRA, J.P. Morgan Securities LLC was censured and fined a total of $100,000, of which $18,090 is payable to FINRA, on July 30, 2024, for violating Rule 611(c) of Regulation NMS by failing to take reasonable steps to ensure that the intermarket sweep orders it routed met the requirements set forth in the regulation.
The firm experienced increased message activity, due in part to the firm's migration to a new exchange trading platform, which resulted in order routing delays. These delays caused the firm, in certain instances, to rely on outdated market data snapshots of protected quotes that did not reflect the current market at the time the firm routed orders to the trading centers. As a result, the firm routed orders that were priced through other market centers' protected quotations, violating the order protection rule.
The firm also failed to establish and maintain a supervisory system, including written procedures, reasonably designed to achieve compliance with Rule 611(c) of Regulation NMS. Although the firm reviewed for latency in its order routing, the firm lacked a process, including written supervisory procedures, to verify that the market data snapshots upon which it relied were accurate at the time the firm routed intermarket sweep orders to trading centers.
Following these violations, the firm remediated this issue through updates to its technology infrastructure, including the addition of servers to handle the increased message volumes and minimize processing delays. The firm also implemented a new daily review designed to identify intermarket sweep orders routed using potentially inaccurate market data and updated its written supervisory procedures to reflect this review. This case underscores the importance of maintaining current technology systems and accurate market data to ensure compliance with order protection rules designed to provide investors with the best available prices.