Broker-Dealer Sponsored Access and DMA Controls

A major broker-dealer with a large Sponsored Access (SA) and Direct Market Access (DMA) client base underwent FINRA sanctions regarding its OATS reporting quality and supervisory systems. FINRA required the firm, a major generator of Nasdaq trading volumes, to undergo a comprehensive review of its supervisory processes and controls and implement recommendations made by an independent consultant.   

Approach

Markets Technology & Compliance assessed the existing processes and controls and OATS reporting quality in detail.  The project analyzed over 40 different combinations of client-managed and vendor managed SA and DMA reporting solutions for which the broker was accountable by use of its MPIDs.  The MTC team mapped process flows for event capture, reporting, and daily administration, then assessed the adequacy of process and supervisory controls over the firmwide process.  

The team provided detailed recommendations for supervisory program improvement, changes to WSPs, and additional corrective action recommendations, and worked with FINRA to ensure recommendations suitably addressed raised concerns.  The team also designed an administration and supervision system to capture all relevant OATS reporting details and supervisory activities in a central platform regardless of OATS reporting data source.

Results

The MTC recommendations provided targeted improvement efforts intended to provide the greatest impact in a coordinated approach across supervision, process, technology, and ongoing supervisory assurance.  The client gained recommended solutions with agility to adjust for potential changes in its SA and DMA business models, and ability to apply changes to its other related regulatory processes.   

The MTC team has provided similar regulatory process and control analyses for many large broker-dealers, and performs periodic compliance systems and process audits for firms seeking independent review of their critical compliance processes.