Cboe Exchange, Inc. has issued a notice of disciplinary decision against Barclays Capital Inc.
From in or about July 2017 through the present, Barclays failed to record accurate order entry times for thousands of manual options orders it transmitted to third-party brokers for execution on Cboe and other options exchanges.
Barclays relied on the third-party brokers to input the time the brokers received each order as the order entry time in Barclays’ order management system; however, the order entry times inputted by the brokers often did not accurately reflect Barclays’ actual transmission times.
Based on a review of a sample of manual options orders, Barclays’ recorded order entry times failed to reflect the actual order transmission times for an estimated 126,432 options orders from July 2017 through March 2022, a portion of which were executed on Cboe.
These acts and practices constitute violations of Cboe Rules 4.2, 7.1, 8.2, and 15.1, during their respective dates of applicability, and Exchange Act Section 17(a) and Rule 17a-3 thereunder by the Firm, in that Barclays, by recording inaccurate order entry times, failed to maintain accurate books and records.
From in or about July 2017 through the present, Barclays failed to establish and maintain a supervisory system and written supervisory procedures (WSPs) reasonably designed to prevent and detect violations of Exchange Act and Cboe recordkeeping requirements.
From July 2017 through April 2021, Barclays conducted only a single review of the accuracy of order entry times and did not otherwise have a supervisory system or WSPs designed to review whether order entry times were accurate. Barclays’ only review, conducted in mid-2019, found that its records of order entry times for orders it transmitted to third-party brokers were inaccurate in many instances.
Barclays did not take reasonable steps to remedy the identified issue. For example, Barclays did not conduct a follow-up review to determine whether any third-party brokers continued to input inaccurate order entry times.
In May 2021, Barclays implemented a surveillance report, and accompanying WSPs, to review whether its recorded order entry times were in sequence, i.e., later than order receipt times but earlier than order execution times. However, from May 2021 through the present, Barclays did not have a reasonable supervisory system or WSPs to review whether its records of order entry times accurately reflected the times Barclays transmitted orders for execution.
These acts and practices constitute violations of Cboe Rules 4.24 and 8.16, during their respective dates of applicability, by the Firm, in that Barclays failed to establish, maintain, and enforce a supervisory system and WSPs reasonably designed to prevent and detect violations of Exchange Act and Cboe recordkeeping rules that require the accurate documentation of order entry times.
Barclays has prior relevant disciplinary history specifically relating to the accurate recording of order entry times and related supervisory violations.
First, in June 2014, Barclays was censured and fined $700,000 by NYSE Arca, Inc. for failing to capture modifications to options orders and failing to record the correct order receipt, entry, and execution times for approximately 250,000 manual options orders, as well as related supervisory violations, from September 2008 through December 2012.
Second, in April and May 2021, Barclays was censured and fined a total of 3$480,000 by Cboe, NYSE American LLC, NYSE Arca, and Nasdaq Phlx LLC (“Phlx”) for failing to record accurate order receipt times for at least 18,375 options orders and accurate order entry times for at least 30,200 options orders, as well as related supervisory violations, from December 2012 through June 2017.
In light of the alleged rule violations described above, and the Firm’s prior relevant disciplinary history, the firm consented to the imposition of:
- a censure; and
- a monetary fine in the amount of $437,500.
This settlement relates to other settlements the firm reached with NYSE American, NYSE Arca, and Phlx.
