Barclays Capital
The findings stated that when a trading desk requested a new proprietary trading account, the firm sometimes reused an existing dormant account instead of opening an entirely new account. In certain instances when the firm reused a dormant account that had previously been used by a market making desk, the firm failed to remove the market maker coding from the account. These accounts were incorrectly coded as market maker accounts engaging in bona-fide market making activities, and the firm improperly relied on the bona-fide market making exception to the locate requirement rather than obtaining and documenting a locate as required.
The findings also stated that the firm failed to establish and maintain a supervisory system reasonably designed to achieve compliance with the locate requirements of Rule 203(b)(1) of Regulation SHO. Although the firm had a supervisory system to monitor its use of the bona-fide market making exceptions, it did not have a system in place to ensure that reused accounts were no longer designated as market making accounts if they were no longer associated with the firm’s market making business.
