False Moves Get Trading Firm Expelled, CEO Barred
July 31, 2012
Financial Industry Regulatory Authority said it expelled a Canadian firm and barred its chief executive from further activity in the United States, after funneling large amounts of overseas day trading through its systems to U.S. markets.
The firm is accused of failing to prevent ‘layering,’ where large amounts of false orders are used to move the price of a stock.
Expelled are Biremis Corp., formerly known as Swift Trade Securities USA, and its president and chief executive officer, Peter Beck.
The expulsion of the firm and barring of Beck are for, in FINRA’s eyes, failing to detect or prevent manipulative trading activities such as "layering," as well as short sale violations, failure to implement an adequate anti-money laundering program, and numerous other securities law violations.
The firm’s main office was located at 55 St. Clair Avenue West, in Toronto, according to the settlement letter signed by counsel for both sides. The company maintained an office at 155 Federal Street, Suite 700, in Boston, Massachusetts in which none of its employees were located and no firm business was conducted. According to the letter, that office was used solely as a mail drop.
"In creating a business that allowed a significant volume of overseas day trading to pass through its systems on a regular basis, Biremis and Mr. Beck needed to devote the appropriate level of resources and personnel to ensure that this business was properly supervised, yet failed on both accounts,’’ Thomas Gira, FINRA Executive Vice President and Head of Market Regulation, said.
FINRA found that at various points from June 2007 to June 2010, Biremis and Beck failed to detect and prevent layering of orders on U.S. markets.
Layering involves sending false orders on one side of the market in a stock, in order to cause market movement that will result in the execution of an order entered on the opposite side. Then, the false orders are cancelled.
During the period January 1, 2009 to June 30, 2010, Biremis received, on average, approximately 1.25 million orders on a daily basis for execution in U.S. markets and in markets outside the U.S.
These orders resulted in, on average, approximately 339,000 executions representing more than 234 million shares on a daily basis in U.S. markets, and approximately 66,000 executions representing more than 76 million shares on a daily basis in markets outside the U.S., according to FINRA.
Biremis also failed, FINRA said, to detect and prevent potential layering activity and potential manipulation of the closing price of equity securities on U.S. markets.
FINRA found that despite the fact Biremis' only business was to execute transactions on behalf of day traders around the world, Biremis and Beck also failed to take steps to make sure the activity did not violate money laundering provisions of the Bank Secrecy Act.
Biremis and Beck neither admitted nor denied the charges, but consented to FINRA's findings. Neither Biremis nor Beck could be immediately reached for comment.
Last year, the United Kingdom’s Financial Services Authority decided to fine Swift Trade 8 million pounds for manipulating the share price of listed companies for short moments of time, using layering.