Bloomberg Tradebook has been fined $5 million by the Securities and Exchange Commission for allegedly violating anti-fraud provision of securities law.
The watchdog found that Tradebook routed certain customer orders - primarily orders entered by customers who paid relatively low commission rates - using an undisclosed arrangement that it referred to internally as the 'Low Cost Router'.
As part of this arrangement, Tradebook allowed three unaffiliated broker-dealers to determine the venues to which certain customer “immediate-or-cancel” orders would be routed for execution. Between November 2010 and September 2018, approximately 6.4 million Tradebook customer orders were executed this way.
The SEC says the practice contradicted Tradebook’s marketing materials, which represented that customer orders would be routed by broker-dealer’s own “advanced” technology, based on factors such as price and liquidity. Additionally, Tradebook is alleged to have provided unverifiable execution venue information to customers for more than a million orders routed using the Low Cost Router.
“Contrary to representations in its marketing materials, Tradebook let unaffiliated brokers make decisions about the routing of certain customer trade orders in a way that lowered Tradebook’s costs,” says Joseph Sansone, chief of the enforcement division’s market abuse unit. “Broker-dealers must take care to provide customers with accurate and up to date information about important features of their order routing services.”
Without admitting or denying the findings in the SEC’s order, Tradebook agreed to be censured and to pay a $5 million penalty.