On Wednesday, Bloomberg Tradebook agreed to pay $5 million and be censured to settle charges from the Securities and Exchange Commission. The SEC claimed Bloomberg made “material misstatements” and omitted “material facts” about how it handled certain customer trade orders.
The SEC found that Bloomberg Tradebook violated an antifraud provision of the securities laws. It’s important to note that Tradebook agreed to the sanctions without admitting or denying the findings in the SEC’s order.
The order found that Tradebook routed certain customer orders--mainly orders from customers who paid low commission rates--using an undisclosed arrangement. The arrangement allowed three unaffiliated broker-dealers to determine the venues to which certain customer “immediate-or-cancel” orders would be routed for execution. According to the SEC, Tradebook did not inform affected customers that a significant portion of their orders would be routed via an unaffiliated broker-dealer.
“In addition, Tradebook provided customers with information about the identity of the market centers where some of the orders placed through the Low Cost Router were executed that was unverified and, at times, without basis,” according to the order.
The chief of the SEC Enforcement Division’s Market Abuse Unit, Joseph G. Sansone, stated, “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.”
On Thursday, a Bloomberg spokeswoman said, “We are pleased to have resolved this matter with the SEC, which pertains to a period during which Tradebook was operating as an executing broker for U.S. stocks.” Adding, “Unrelated to this matter, Tradebook ceased to operate as an executing broker in U.S. stocks in September 2018... We remain focused on ensuring that our business maintains best practices and the highest standards to bring transparency and fairness to the markets.”
