Enforcement Actions
Financial Industry Regulatory Authority (FINRA)
NOTE: Stipulations of Fact and Consent to Penalty (SFC); Offers of Settlement (OS); and Letters of Acceptance Waiver, and Consent (AWC) are entered into by Respondents without admitting or denying the allegations, but consent is given to the described sanctions & to the entry of findings. Additionally, for AWCs, if FINRA has reason to believe a violation has occurred and the member or associated person does not dispute the violation, FINRA may prepare and request that the member or associated person execute a letter accepting a finding of violation, consenting to the imposition of sanctions, and agreeing to waive such member's or associated person's right to a hearing before a hearing panel, and any right of appeal to the National Adjudicatory Council, the SEC, and the courts, or to otherwise challenge the validity of the letter, if the letter is accepted. The letter shall describe the act or practice engaged in or omitted, the rule, regulation, or statutory provision violated, and the sanction or sanctions to be imposed.
January 2010
Credit Suisse Securities (USA) LLC
SFC/09-NYSE-24/January 2010

Credit Suisse failed to adhere to the principles of good business practice in that on Nov. 14, 2007, beginning at approximately 3:40 p.m., a Credit Suisse proprietary algorithm routed hundreds of thousands of cancel/replace requests to the New York Stock Exchange for orders that had been previously generated by the algorithm, but, due to an unforeseen programming issue, were never sent by the algorithm. The unusually large amount of cancel/replace messages contributed to the over-queuing of message traffic in all of the securities, approximately 975 in total, traded at five posts on the NYSE Trading Floor. Messages, including new orders, modifications of orders, and cancellation requests were frozen in queue and could not be immediately processed. These five posts could not be closed on time, ultimately closing between 4:10 p.m. and 4:27 p.m.

Credit Suisse violated NYSE Rule 342 by failing to properly supervise the development and implementation of the firmís proprietary algorithm, particularly with respect to certain revisions to the algorithm that contributed to the Nov. 14 incident. The firm also failed to properly monitor the operation of the algorithm, as evidenced by the fact that the firm was unaware that hundreds of thousands of messages sent by the algorithm were being rejected by NYSE systems until being notified of the issue by NYSE Regulation the following day. These failures by the firm also constituted a bad business practice in violation of NYSE Rule 401.

Credit Suisse Securities (USA) LLC: Censure; Fined $150,000
Tags:  Algorithmic Trading     |    In: Cases of Note : NYSE Rules
Bill Singer's Comment

With more scrutiny being given to automated trading and prop trading, this case will likely serve as an example of why detractors of such rapid-fire order entries believe the practice needs to be curtailed.  To read the full details of this case, visit http://www.nyse.com/pdfs/09-NYSE-24.pdf

Enforcement Actions