.Readers of this blog, our clients, and people who have been at a DCM seminar presentation in the past may recall DCM's distinction between trade compliance and market compliance. We use trade compliance to refer to oversight of transactional activities - bid, offer, execution and the related issues like disruptive trading - while we use market compliance to refer to oversight of other areas of the regulatory rules that frequently deal with market transparency - such as block trade reporting and Tag 50 log ins. Frequently, disciplinary actions under the market compliance rules are accompanied by smaller fines and possibly a short suspension (especially in the case of improper use of Tag 50s).
But every once in a while, the market is reminded that market transparency and accuracy is just as important to the exchanges under market compliance as it is under trade compliance. Today the ICE issued a disciplinary notice for Merrill Lynch International that entailed a $200K fine. The notice is here.
The notice indicates that the firm had failed to report block trades within the 15 minute reporting window " at various times" of a 4 month period. They also were alleged to have misreported the time of execution of the block trade (which can be a concern - the individual may know the reporting time and attempt to fudge the execution time to cover their failure to report). They also cited that a broker must - for every trade or with by some other standing direction - have explicit direction that a trade may be executed as a block.
Finally, since there appear to be failures in what one might expect to be standard control processes for a brokerage firm, a failure to supervise violation was also referenced.
This is a fairly significant fine for a market compliance issue but it is by no means the largest. It does, however, serve as abundant caution that it is not just trade compliance that can bring significant impacts from the exchange disciplinary process.