SEC Charges Bloomberg Tradebook for Order Routing Misrepresentations
Posted on 05/06/2020
The Securities and Exchange Commission (SEC) 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. Bloomberg Tradebook, LLC., is the agency broker of Bloomberg L.P.
The SEC discovered that Bloomberg 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 US$ 5 million penalty.
What Happened?
According to the SEC release, “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.”
Tradebook’s marketing materials were not representing what the service actually does, as the platform allowed unaffiliated brokers make decisions about the routing of certain customer trade orders in a way that lowered Tradebook’s costs, according to the SEC.