FINRA Fines Clear Street $175,000 for Options Reporting and Supervisory Failures

​The Financial Industry Regulatory Authority (FINRA) has fined Clear Street LLC $175,000 to settle allegations regarding inaccurate options order reporting and deficiencies in the firm's supervisory systems. In addition to the monetary penalty, the firm has agreed to a censure.

According to the settlement, the violations centered on Clear Street’s routing of options orders to third-party broker-dealers for execution. FINRA found that between January 2022 and June 2023, the firm failed to accurately designate certain orders with the correct "origin code," distinguishing between "Customer" and "Professional Customer" status.

A "Professional Customer" designation is required for non-broker-dealer clients who average more than 390 options orders per day. However, FINRA’s investigation revealed that Clear Street incorrectly calculated this threshold. Specifically, the firm counted complex multi-leg options orders containing nine or more legs as a single order, rather than counting each leg separately as required.

As a result of this calculation error, Clear Street reportedly mismarked 162,809 orders—totaling 998,170 contracts—as originating from a "Customer" when they should have been marked as "Professional Customer." This resulted in violations of the Securities Exchange Act and multiple FINRA rules.

The regulator also cited Clear Street for supervisory failures between February 2021 and August 2023. The firm relied on a third-party post-trade surveillance report that contained the same logic error regarding multi-leg orders, rendering it ineffective for detecting the inaccurate reporting. Clear Street corrected the supervisory deficiency in August 2023 after being alerted by FINRA.