NASD Regulation Censures and Fines Interactive Brokers For Market Systems Violations WASHINGTON, April 18 /PRNewswire/ -- NASD Regulation, Inc., today announced that it censured and fined Interactive Brokers, L.L.C., $230,000 for multiple violations, including order routing, Order Audit Trail System (OATS) reporting, record keeping and supervision violations. During a three-year period Interactive Brokers violated NASD rules by mis-programming its order routing system so that customer orders that were routed through Nasdaq's SelectNet system to electronic communication networks (ECNs) were treated as "non-negotiable," which means the essential terms of the order, including the size, could not be changed. NASD rules prohibit non-negotiable orders from being sent to ECNs and permit ECNs to reject them. In most cases, ECNs exercised their right to reject them, due to difficulties in programming their systems to accept this type of order. Interactive Brokers also failed to submit Order Audit Trail System reports in the manner required by NASD OATS rules. Interactive Brokers' record keeping violations occurred as a result of its system programming which retained certain required details concerning its routing of orders through SelectNet for no more than one week. NASD rules require this data to be retained for three years. Interactive Brokers' OATS and record keeping violations spanned a 20-month period from August 1999 through April 2001. Interactive Brokers also was ordered to revise its supervisory procedures to ensure that future computer programming changes will result in the firm's automated routing and execution system, OATS reports, and maintenance of required books and records being in compliance with NASD and SEC rules. Investors can obtain more information and the disciplinary record of any NASD-registered broker or brokerage firm by calling 800-289-9999 or by sending an e-mail through NASD Regulation's Web Site at http://www.nasdr.com . The National Association of Securities Dealers, Inc. is the largest securities industry, self-regulatory organization in the United States. It is the parent organization of NASD Regulation, Inc.; the American Stock Exchange, LLC; and NASD Dispute Resolution, Inc. For more information about the NASD and its subsidiaries, please visit the following Web sites: http://www.nasd.com ; http://www.nasdr.com ; http://www.amex.com ; http://www.nasdadr.com .
Posted on IB Forum http://www.interactivebrokers.com/discus/messages/6/83.html?1019148347 On March 8, 2002, Interactive Brokers (âIBâ) entered into a settlement to resolve an inquiry by NASD Regulation, Inc. (âNASDRâ) regarding the electronic format of orders sent by IB to electronic communication networks (âECNsâ) via the SelectNet system; the electronic format of Order Audit Trail (âOATSâ) reports and the retention thereof; and IBâs related supervisory practices. Specifically, NASDR found that IB violated an NASD rule concerning the use of the Nasdaq SelectNet system by electronically sending orders with an âNâ (or ânon-negotiableâ) modifier in accessing ECNs (in cases where IB did not route orders directly to the ECNs). NASDR also found that IB provided 24-character hexadecimal order identification numbers in its OATS reports rather than an 8-character alphanumeric identifier as required by the OATS rules; found that IB failed to retain for a sufficient period of time certain electronic information created by IB as a software debugging record; and found deficiencies in IBâs supervision of these aspects of the firmâs operations. IB cooperated with NASDR staff during the investigation and is pleased that it was able to resolve the NASDR inquiry on satisfactory terms. Under the terms of the settlement, IB did not admit or deny NASDR findings that the firm failed to comply with NASD regulations, but agreed, among other things, to make certain changes in its systems based on NASDR findings. IB is committed to providing to its customers the highest quality electronic trading systems available to market participants anywhere. We are continuously working to update and improve our systems to maintain our preeminence in high-speed execution and straight-through clearing services. Thanks, David Battan, Vice President and General Counsel, Interactive Brokers
BFD. The Empire strikes back. I'd be more impressed if NASD looked into something with a little more significance, say Merrill analysts pushing merchandise that they described internally as "crap" and "POS". Or Morgan Stanley. Or Goldman. Don't hold your breath. IB has stuck it to the big boys and now is paying the price.