UBS Securities LLC has agreed to pay a $32,500 fine and accept a censure to settle findings by The Nasdaq Stock Market LLC that its market access controls were not reasonably designed to prevent erroneous orders in warrants.
The settlement covers a review period running from August 29, 2023 to July 16, 2025. During that time, according to Nasdaq, UBS maintained controls that fell short in relation to warrants because those instruments are not subject to Limit Up/Limit Down (LULD) bands.
Antiredundancy logic left warrant orders uncovered
At the centre of the matter was an antiredundancy feature in the firm's control environment. Under that logic, an order paused and reviewed by UBS personnel at the parent-order level for one or more price or size controls would not trigger additional downstream controls at the child-order level.
Securities covered by the LULD Plan were subject to an additional LULD-based control. Warrants were not. As a result, the firm's market access controls did not include an additional automated control applicable to certain warrant orders once they were released following review by firm personnel.
The LULD Plan is an SEC-approved market mechanism designed to prevent trades in NMS Stocks from occurring outside specified price bands, set at a percentage above and below a security's average reference price over the preceding five-minute period.
Rules cited in the settlement
Nasdaq determined that the firm violated Section 15(c)(3) of the Securities Exchange Act and Rules 15c3-5(b) and 15c3-5(c)(1)(ii) thereunder, as well as Nasdaq Rule General 9, Sections 1(a) and 20(a).
Alongside the monetary penalty, UBS Securities has agreed to a censure.
