← Broker database 2024-06-18
Kepler Capital Markets Fined $475,000 for Overstating Trade Volume Data
According to FINRA, Kepler Capital Markets, Inc. was censured and fined $475,000 for overstating its advertised trade volume on a private market data provider and failing to establish adequate supervisory systems to ensure accurate reporting.
The firm configured its systems to automatically advertise its daily trading volume in numerous securities through a subscription-based market data provider. Following a change in the provider's processes, Kepler modified its systems to split trade volume advertising between "high-touch" and "low-touch" orders. Due to a misconfiguration in the end-of-day reconciliation process, the firm mistakenly advertised orders from its parent company twice—once as high-touch volume and once as low-touch volume—effectively double-counting a significant portion of its advertised trading activity.
Accurate trade volume data is essential for market transparency and investor decision-making. Market participants rely on volume data to assess liquidity, determine fair prices, and make informed trading decisions. When a firm overstates its trading volume, it creates a misleading picture of market activity and liquidity that can influence how other market participants interact with that firm.
The supervisory failures were significant. When Kepler modified its systems to split volume advertising, it failed to reasonably test whether trade volume data was being accurately communicated to the provider. The firm's intra-day reviews compared advertised volume against its order management system in real-time, but this review could not detect errors occurring during the end-of-day reconciliation process. The firm had no supervisory system or written procedures to determine whether it was accurately reporting trade volume through the end-of-day reconciliation.
After discovering the issue, Kepler remediated the misconfiguration and implemented a review process that assesses accuracy after end-of-day reconciliation is complete. The firm also updated its written supervisory procedures to include this review.
For investors and market participants, this case illustrates the importance of accurate market data reporting. While the firm's violation involved technical systems rather than deliberate misrepresentation, the impact on market transparency was the same. The $475,000 fine—the largest among firm penalties this month—reflects the importance FINRA places on data accuracy and the potential market-wide impact of reporting failures. Firms must not only implement systems for reporting market data, but also maintain robust testing and supervisory processes to ensure ongoing accuracy.