NEW YORK (AFX) - The National Association of Securities Dealers hit Brut LLC, a trading system owned by Nasdaq Stock Market Inc., with a $2.2 million fine for publishing inaccurate trade reports and other violations.
The NASD, a big Wall Street regulator, said Thursday that from October 2001 through July 2005, Brut's trade-execution reports contained 'critical errors.'
Brut's reports didn't include the full size of certain orders. The incorrect treatment of these orders 'impacted Brut's reported order size, reduced the order execution time, and increased the number of covered orders,' the NASD said.
Brut, which didn't admit wrongdoing, was acquired by Nasdaq in September 2004. Nasdaq is moving to integrate Brut and its other systems into a single trading book. 'We worked diligently with the NASD to resolve all outstanding issues,' said Nasdaq spokeswoman Bethany Sherman.
The NASD said some of Brut's errors may have made some execution-quality statistics look better than was actually the case, while other errors may have caused some statistics to look worse than was actually the case.
'Brut's inaccurate reports compromised the ability of the investing public and other market participants to accurately assess execution quality and compare venues for execution,' said NASD Senior Executive Vice President Stephen Luparello.
The NASD said other violations uncovered at Brut included backing away from posted quotes, failing to maintain two-sided quotations, failing to comply with rules dealing with trade-throughs and locked and crossed markets, failing to retain emails, inadequate supervision and deficiencies with an order audit trail system.
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