E*Trade Financial Corp. (ETFC) said the Financial Industry Regulatory Authority is examining how two of its units, including one it wants to sell, routed orders.
Finra told the online brokerage on July 11 that it’s looking into the order routing practices of E*Trade Securities LLC and G1 Execution Services LLC, according to the company’s quarterly report filed today.
E*Trade said July 24 that it plans to sell G1 Execution, months after disclosing that it had found “shortcomings” in how it measured whether trades were struck at the best prices. In today’s filing, E*Trade said it last year completed a review of order handling practices and pricing for trades between E*Trade Securities and G1 Execution, also known as G1X.
Regulators “may initiate investigations into the company’s historical practices which could subject it to monetary penalties and cease-and-desist orders, which could also prompt claims by customers of E*Trade Securities LLC,” the company said today. “Any of these actions could materially and adversely affect the company’s broker-dealer businesses.”
E*Trade Chief Financial Officer Matthew Audette told analysts on a July 24 conference call that E*Trade is looking to sell G1X and expects to announce a divestiture within six months. Market-making profits are under pressure in the U.S. as computerized trading squeezes margins and volume stagnates.
To contact the reporter on this story: Nick Baker in Chicago at firstname.lastname@example.org
To contact the editor responsible for this story: Lynn Thomasson at email@example.com