From January 2011 through December 2022, Barclays Capital failed to report, or inaccurately reported, over-the-counter options positions to the LOPR in approximately 4.3 million instances in violation.

Punishment? A censure and $2.5 million fine without admitting or denying the findings.

r/Superstonk - From January 2011 through December 2022, Barclays Capital failed to report, or inaccurately reported, over-the-counter options positions to the LOPR in approximately 4.3 million instances in violation. Punishment? A censure and $2.5 million fine without admitting or denying the …

Source: https://www.finra.org/sites/default/files/fda_documents/2019061076001%20Barclays%20Capital%2C%20Inc.%20CRD%2019714%20AWC%20gg.pdf

BACKGROUND

Barclays Capital became a FINRA member in October 1987.
The firm is headquartered in New York, New York and has 16 branches with approximately 3,000 registered representatives. Barclays Capital’s business includes options and equities trading on behalf of itself and customers, underwriting, and market-making.
In May 2018, FINRA, Cboe BZX Exchange, Inc., and Miami International Securities Exchange, LLC censured and fined the firm $400,000 for failing to report options positions to the Large Options Positions Reporting (LOPR) system in over 310,000 instances and inaccurately reporting options positions to the LOPR in 2.7 million instances between January 2010 and December 2015, and imposed an undertaking requiring the firm to correct supervisory and technological deficiencies.
In January 2014, FINRA censured and fined the firm $750,000 for failing to report positions to the LOPR in over 1.47 million instances, submitting inaccurate reports in over 700,000 instances, exceeding applicable position limits in four options, and failing to establish and maintain a supervisory system reasonably designed to achieve compliance with LOPR requirements and applicable position limits between January 2010 and March 2013.
From January 2011 through December 2022, Barclays Capital failed to report, or inaccurately reported, over-the-counter options positions to the LOPR in approximately 4.3 million instances in violation of FINRA Rules 2360(b)(5) and 2010.
The firm also failed to establish and maintain a supervisory system reasonably designed to achieve compliance with FINRA Rule 2360(b)(5) during the same period in violation of NASD Rule 3010 and FINRA Rules 31102 and 2010.
FINRA requires member firms to report large options positions to the LOPR.
FINRA uses LOPR information to identify holders of large options positions and to surveil for potentially manipulative behavior, including attempts to corner the market in the underlying equity, leverage an option position to affect the price, or move the underlying equity to change the value of a large option position.
The accuracy of LOPR reporting is essential to FINRA’s surveillance. It is particularly important with respect to the OTC options market because there is no independent source of data for regulators to review OTC options.
FINRA Rule 2360(b)(5) requires member firms to report to the LOPR each customer or firm account that, acting alone or in concert, has established an aggregate position of 200 or more option contracts on the same side of the market covering the same underlying security or index.
The report must identify the account holder and the total number of option contracts for each options class comprising the reportable position and must include other information as prescribed by FINRA. A violation of FINRA Rule 2360(b) also is a violation of FINRA Rule 2010, which requires “[a] member, in the conduct of its business, [to] observe high standards of commercial honor and just and equitable principles of trade.”

From January 2011 through December 2022, Barclays Capital failed to report, or inaccurately reported, OTC options positions to the LOPR in approximately 4.3 million instances.
These reporting violations stemmed from four separate coding errors, which spanned from four years to approximately eight years. First, from January 2011 through September 2019, Barclays Capital failed to report OTC positions to the LOPR in approximately 3.6 million instances.
In these instances, the firm applied aggregation logic that improperly failed to aggregate positions on the same side of the market covering the same underlying security or index if certain features of the positions, such as the strike price or expiration date, did not match.
Second, from March 2011 through April 2019, Barclays Capital failed to report Exchange Traded Fund (ETF) option positions to the LOPR in approximately 392,000 instances. These failures were caused by Barclays Capital inadvertently applying to reportable ETF option positions a suppression logic that prevented the submission of non-reportable positions.
Third, from January 2014 through October 2021, Barclays Capital failed to report OTC options positions to the LOPR in approximately 24,000 instances. In these instances, coding errors caused positions that were either booked or re-booked after the trade date to be reported with a trade date that was later than the actual trade date. As a result, positions were not reported during the time between the actual trade date and the later, incorrectly reported trade date.
Fourth, from January 2018 to December 2022, Barclays Capital failed to accurately report quantities of certain OTC option positions held in firm accounts in approximately 300,000 instances. These failures stemmed from a systems logic issue that began when Barclays Capital transitioned the LOPR submission process to a new trading software platform.

From January 2014 through October 2021, the firm did not have a reasonably designed supervisory review to determine whether it reported positions with the correct trade date. Lastly, from January 2018 through December 2022, the firm did not have a reasonably designed supervisory review to determine whether it reported accurate quantities of OTC option positions held in firm accounts.

As a result of these supervisory failures, Barclays Capital did not detect and correct the flawed aggregation logic, the improper suppression of reportable ETF option positions, and the coding errors concerning the effective dates and reported quantities of certain positions for over ten years.

Sanctions:

In determining the appropriate sanctions in this matter, FINRA considered, among other factors, that Barclays Capital: (1) identified, self-reported to FINRA, and remediated the issues described in Section A.2. above concerning its erroneous aggregation logic and positions reported with either incorrect trade dates or incorrect quantities; (2) determined the number of OTC LOPR positions reported with inaccurate quantities going back to January 2018; and (3) implemented numerous enhancements to its supervision, surveillance, and governance structure concerning LOPR.

Respondent also consents to the imposition of the following sanctions:

a censure;
a fine of $2.5 million

TLDRS:

From January 2011 through December 2022, Barclays Capital failed to report, or inaccurately reported, over-the-counter options positions to the LOPR in approximately 4.3 million instances in violation.
Punishment? A censure and $2.5 million fine without admitting or denying the findings.
From January 2014 through October 2021, Barclays Capital failed to report OTC options positions to the LOPR in approximately 24,000 instances. In these instances, coding errors caused positions that were either booked or re-booked after the trade date to be reported with a trade date that was later than the actual trade date. As a result, positions were not reported during the time between the actual trade date and the later, incorrectly reported trade date.
From January 2018 to December 2022, Barclays Capital failed to accurately report quantities of certain OTC option positions held in firm accounts in approximately 300,000 instances. These failures stemmed from a systems logic issue that began when Barclays Capital transitioned the LOPR submission process to a new trading software platform.
From January 2014 through October 2021, the firm did not have a reasonably designed supervisory review to determine whether it reported positions with the correct trade date. Lastly, from January 2018 through December 2022, the firm did not have a reasonably designed supervisory review to determine whether it reported accurate quantities of OTC option positions held in firm accounts.
As a result of these supervisory failures, Barclays Capital did not detect and correct the flawed aggregation logic, the improper suppression of reportable ETF option positions, and the coding errors concerning the effective dates and reported quantities of certain positions for over ten years.

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