Mizuho Securities USA LLC has recently agreed to pay out a fine worth $150,000. This comes as part of a settlement agreement it had done with the US regulator, the Financial Industry Regulatory Authority.
OMS Errors Costing Mizuho $150,000
The settlement itself is in regards to rule violations that Mizuho had committed during the time of February of 2015 and December of 2016, referred to as the Review Period. During this time, the Firm had taken liberties in overstating its trading volumes in various securities that it had advertised through the use of Bloomberg. The Firm itself had failed to establish the adequate procedures that comply with the regulatory requirements in regard to the accuracy of trading volumes advertised.
Within the review period, in particular, Mizuho had leveraged a third-party OMS vendor and configured it to automatically advertise the daily trading volume of certain desks. These desks advertised an array of securities through Bloomberg, who then uses these advertised trading volumes to compile ranking and reports of broker-dealers based on the security in particular.
The Offending Event
During the time of April of 2015 and December of 2016, the OMS Mizuho had utilized for its ETF desk had a flaw reveal itself. The OMS subsequently identified and advertised the internal booking entries, instead, which itself reflects the shares the Firm had delivered and received in regard to the monthly expiration of a single stock future. However, the OMS portrayed these numbers of executed trades, instead, which resulted in the advertisements through Bloomberg overstating their trading volumes.
This resulted in the overstatement of advertised trading volumes across an array of securities and doing so by millions of shares. An example of this would be a specific event that occurred on the 16th of December, 2016. Due to the OMS flaw, the Firm had overstated the advertised trading volumes of securities of Firm A, doing so by a staggering 1,617,000 shares.
When you count it all, the result of this system flaw caused Mizuho to overstate its trading volumes for 218 different securities, doing so in 1,047 instances. In total, this marks an overstatement of 122,045,795 shares. Luckily, Mizuho had fixed the flaw in the system by December of 2016, but the damage had already been done.
Flaws Across The Board
Alongside this, during the period of February of 2015 and November of 2016, the OMS that was used by the Firm’s Japan Broker-Dealer Desk had a flaw as well. This caused duplicate advertisements in regards to the trading volumes of multiple customer orders within the same symbol. The Firm had combined this into a single manual order, executing it at a single average price.
The flaw in the OMS, however, had caused Mizuho to overstate the advertised trading volumes through Bloomberg, doing so for 21 different securities across 55 instances. In total, this stands as 741,956 shares being falsely represented. This flaw, in particular, was remediated in May of 2017, as well.