Virtu Americas LLC
The findings stated that the firm did not reasonably document its system of risk management controls to demonstrate that certain controls were reasonably designed. Neither the firm’s supervisory procedures, nor other documentation, reasonably described the firm’s process of determining thresholds for certain controls or the rationale for the thresholds chosen, and the firm largely did not have records of its rationales for such thresholds.
In addition, certain of the firm’s risk management controls triggered soft blocks, which paused an order until the firm reviewed the block. The firm did not have written procedures concerning how the firm’s reviewers were to review soft block alerts or the circumstances under which a soft block should be overridden or confirmed. The firm’s written procedures also did not require reviewers to contemporaneously document their review or their rationale for overriding a soft block and releasing the subject orders into the market.
Accordingly, the risk management controls to which these soft blocks applied were not reasonably designed. Ultimately, the firm had decommissioned the two platforms that housed these controls.
The findings also stated that the firm failed to establish, document, and maintain a system reasonably designed to regularly review the effectiveness of its risk management controls and supervisory procedures. While the firm maintained written procedures to review control thresholds and to assess the overall operation of its controls, the procedures did not reasonably describe what the firm was required to review or how the review was to be conducted.
Additionally, the firm’s failure to reasonably document how certain thresholds were determined or why they were reasonable resulted in an unreasonable annual evaluation of the effectiveness of individual risk controls and of its overall system of risk management controls. Ultimately, the firm remediated these issues.
