SEC Fines Bloomberg Tradebook $5M

The SEC's order found that Tradebook routed certain customer orders — mainly orders entered by customers who paid relatively low commission rates — using an undisclosed arrangement that the firm referred to internally as the "Low Cost Router."

As part of that 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 notify affected customers that a significant portion of their orders would be routed via an unaffiliated broker-dealer rather than Tradebook itself, the SEC said.

"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" in more than 1 million orders, according to the SEC's order.

Between November 2010 and September 2018, about 6.4 million Tradebook customer orders were executed based on routing decisions made by those unaffiliated broker-dealers, according to the SEC. That practice contradicted Tradebook's marketing materials, which claimed customer orders would be routed by Tradebook's own "advanced" technology, based on factors including price and liquidity, the SEC said.

"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," according to Joseph G. Sansone, chief of the SEC Enforcement Division's Market Abuse Unit. "Broker-dealers must take care to provide customers with accurate and up to date information about important features of their order routing services," he said in a statement.

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