Prop trading firm sanctioned for oversight failures

A Halifax-based prop trading firm admitted that it failed to properly supervise its offshore traders that repeatedly engaged in manipulative trading.

The Nova Scotia Securities Commission (NSSC) approved a settlement agreement with Maritra Trading Services Inc. The day trading firm is based in Nova Scotia but has 66 traders, mostly located in China, that trade its capital on Canadian markets.

According to the regulator, between April 2015 and March 2022, certain traders at the firm, “engaged in repeated instances of manipulative trading activities known as ‘spoofing’ and ‘layering’.”

Despite being alerted to the manipulative trading by investment dealers that processed the firm’s trades through its direct electronic access accounts, the firm didn’t take adequate action, the NSSC said.

“Maritra failed to adequately monitor trading activities on its accounts and did not ensure that an adequate compliance structure was put in place to prevent those trading activities from continuing to occur,” the regulator said in a release.

In a settlement, the firm admitted to securities law violations and accepted responsibility for its misconduct, the NSSC said.

Under the settlement, Maritra agreed to pay a $110,000 penalty and $10,000 in costs. It also agreed to hire an independent regulatory consultant to design a new compliance structure that would identify and prevent manipulative trading.

“Although market manipulation is one of the most serious violations under the Securities Act, this is not a case about a respondent that deliberately set out to abuse the market or deceive investors” said Ibrahim Badawi, enforcement counsel at the NSSC, in a release.

“Rather, this is a case about inaction,” he said. “In the circumstances, the respondent should have taken greater steps to monitor and supervise its outsourced traders and ensure that an adequate compliance structure was put in place. It failed to do so.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.