The Securities and Exchange Commission today filed settled charges against registered broker-dealer Bloomberg Tradebook LLC for making material misrepresentations and omitting material facts about how the firm handled certain customer trade orders.
The SEC’s order finds 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. Tradebook did not inform affected customers that a significant portion of their orders would be routed by an unaffiliated broker-dealer instead of by Tradebook. Between November 2010 and September 2018, approximately 6.4 million Tradebook customer orders were executed based on routing decisions made by these unaffiliated broker-dealers. This practice contradicted Tradebook’s marketing materials, which represented that customer orders would be routed by Tradebook’s own “advanced” technology, based on factors such as price and liquidity. Additionally, Tradebook 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,” said Joseph G. 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.”
The SEC’s order finds that Tradebook violated an antifraud provision of the securities laws. Without admitting or denying the findings in the SEC’s order, Tradebook agreed to be censured and to pay a $5 million penalty, an amount that reflects Tradebook’s significant cooperation with the SEC staff.
The SEC’s investigation was conducted by Vanessa De Simone, Simona Suh, Mandy Sturmfelz, and Mathew Wong of the Market Abuse Unit and supervised by Mr. Sansone.
