FINRA Fines Nomura Trading Arm

The equity trading arm of Nomura was fined $1.5 million by the Financial Industry Regulatory Authority (FINRA).

FINRA made the announcement against Instinet LLC, “an institutional, agency-only broker that also serves as the independent equity trading arm of its parent, Nomura Group.” According to its Wikipedia page.

FINRA said that Instinet violated its market access rule.

“Instinet, LLC has been censured and fined a total of $1.575 million for violations of various provisions of Rule 15c3-5 of the Securities Exchange Act of 1934 (known as the Market Access Rule) and related exchange supervisory rules.” FINRA said in a statement.“The action was taken by the Financial Industry Regulatory Authority (FINRA), along with BOX Options Exchange LLC (BOX); the Cboe BZX Exchange, Inc.; Investors Exchange LLC (IEX); The NASDAQ Stock Market LLC; the New York Stock Exchange; and certain of their affiliated Exchanges (collectively, ‘Exchanges’). The fine was apportioned among FINRA and the Exchanges.

“In settling this matter, Instinet neither admitted nor denied the charges but consented to the entry of FINRA’s and the Exchanges’ findings.

“The Market Access Rule requires broker-dealers that provide their customers access to an exchange or alternative trading system to adequately control the financial and regulatory risks of providing such access. The rule is designed to ensure that broker-dealers appropriately control the risks associated with market access, so as not to jeopardize their own financial condition, that of other market participants, the integrity of trading on the securities markets, and the stability of the financial system.”

Among the violations found in the action, they include:

• In Matter Nos. 20130368360 and 20130384257, the New York Equities Section of FINRA’s Department of Market Regulation (“Market Regulation”) reviewed pre-opening spoofing by the Firm from August 2012 through December 2012, and the Firm’s compliance with Rule 15c3-5 of the Securities Exchange Act of 1934 (“SEA”) (the “Market Access Rule”).
• In Matter 20130376217, the Trading Analysis Section (“Trading Analysis”) of Market Regulation reviewed potential layering and wash trades by the Firm’s Market Access Clients from July 17, 2013 through May 29, 2015, and the Firm’s compliance with the Market Access Rule.
• In Matter No. 20150463452, the Market Manipulation Investigations Group of Market Regulation reviewed the Firm’s layering surveillance’s and exception reports in effect from April 2015 through April 2016, and the Finn’s compliance with the Market Access Rule. 4
• In Matter No. 20150482156, Trading Analysis reviewed the Firm’s procedures, systems, and controls related to potential layering, pre-opening spoofing, intraday spoofing, and wash trades in place from January 1, 2015 through May 31, 2017, and the Firm’s compliance with the Market Access Rule.

“This case demonstrates the importance of reasonable market access procedures to appropriately monitor for errors and risks that can be harmful to the integrity of our securities markets,” said FINRA and the Exchanges in a joint statement.

Instinet has been a trading firm since 1979, according to FINRA’s action; it was taken over by Nomura in 2007 and Nomura transferred all its trading activity to Instinet in December 2012.

FINRA is a Self-Regulatory Organization (SRO), which is responsible for overseeing trading on the NYSE and NASDAQ; while created by an act of Congress, FINRA functions as a private and independent regulator.