BGC Financial, L.P., a member of the Financial Industry Regulatory Authority (FINRA), has submitted a Letter of Acceptance, Waiver, and Consent (AWC) in response to alleged rule violations. The purpose of this AWC is to propose a settlement regarding the described rule violations. BGC has consented to the findings without admitting or denying them, thus accepting FINRA's proposed sanctions.

Regulatory Concerns: BGC's Supervisory System Failures

BGC, based in New York and a member of FINRA since July 1987, currently operates 13 branches and employs approximately 270 registered representatives. The firm's services encompass brokerage activities related to options, fixed income, and equity securities.

The regulatory concern pertains to a period spanning from December 2014 to June 2023 when BGC failed to establish and maintain a supervisory system capable of detecting potential spoofing and layering in equity securities. This failure to uphold adequate supervision is a violation of FINRA Rules 3110 and 2010.

Spoofing and layering, forms of market manipulation, involve the placement of non-bona fide orders or multiple limit orders on one side of the market to create misleading appearances of supply and demand. These activities can distort the price or volume of security and deceive other market participants into executing trades under false pretenses.

From December 2014 to January 2021, BGC lacked a supervisory system to monitor its traders for potential spoofing and layering. During this period, the firm's equity trading desks executed an average of approximately 5,000 equity transactions daily.

In February 2021, BGC implemented automated surveillance measures to identify potential spoofing and layering. However, these measures were found to have certain unreasonable parameters, such as requiring the entry of large orders on both sides of the market, which failed to consider that these manipulative activities could also involve smaller-sized or single orders.

Settlement Agreement: BGC's Consent to Regulatory Sanctions

As part of the settlement, BGC consents to the following sanctions: a censure and a financial penalty of $200,000. The firm has agreed to pay the fine upon notice of the AWC's acceptance and has waived any right to claim an inability to pay.