IMC Financial Markets Fined $1.2 Million for CAT Reporting Failures

IMC Financial Markets has agreed to pay a $1.2 million fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA) following failures in its Consolidated Audit Trail (CAT) reporting obligations. The violations spanned from June 22, 2020, when the obligation first came into effect, until June 30, 2023.

During this period, IMC failed to report tens of billions of equity and options order events accurately and on time to the CAT Central Repository, as required under FINRA Rules 6830, 6893, and 2010. As a large industry player, IMC was responsible for ensuring that its order event data was correctly submitted, but multiple software coding and system issues led to significant errors in its reporting processes. In total, approximately 21.8 billion inaccurate events were reported, covering 35 distinct error types.

The firms errors, which varied in nature and duration, included a misreported time-in-force code for 7.5 billion events. Instead of using the code “IOC” for Immediate or Cancel orders, IMC inaccurately reported them as “GTX” (Good till Crossing). This error lasted from June 2020 until April 2021. Additionally, over 680 million equity order events were submitted without the required millisecond precision between October 2020 and June 2023. IMC also reported 1.9 billion events that contained linkage errors between July and August 2022. Furthermore, the firm failed to report 6.9 billion equity and options orders events in a timely manner due to connectivity issues with exchanges and broker-dealers.

By June 2023, IMC had taken steps to update its reporting system and address these widespread violations. The company submitted corrective reports to the CAT Central Repository, resolving over 99.9% of the 28.7 billion late and inaccurate submissions.

The investigation also revealed that, between June and September 2020, IMC lacked an adequate supervisory system to oversee the accuracy of its CAT reporting. Additionally, during this period, the firm did not have written supervisory procedures in place to ensure compliance with CAT obligations. Although IMC implemented a supervisory system in September 2020, it was deemed too narrow in scope, given the enormous volume of data the firm was processing.

IMC's quarterly reviews of data accuracy initially covered only three complete order cycles. Although the reviews expanded over time, they remained insufficient for the scale of the firm's operations, resulting in violations of FINRA Rules 3110 and 2010, which require firms to establish proper supervisory systems.

In addition to the monetary penalty, IMC has agreed to a censure and an undertaking. A member of senior management, registered as a principal of the firm, must now certify in writing that the issues have been fully resolved and that an effective supervisory system has been implemented to ensure compliance with FINRAs CAT reporting rules going forward.