Notice of Disciplinary Action

RESPONDENT:

Morgan Stanley & Co. LLC

SEF RULES:

(Legacy) Rule 407(h):

It shall be an offense for a Participant or Customer to:

(h) fail to supervise its employees or agents in the conduct of the Participant’s or Customer’s business related to the Facility.

FINDINGS:

Pursuant to an offer of settlement in which Morgan Stanley & Co. LLC (“Morgan Stanley”) neither admitted nor denied the rule violations or factual findings upon which the penalty is based, on April 17, 2024, a Hearing Panel of the NEX SEF (“Panel”) found that between January 2021 and May 2021, Morgan Stanley failed to adequately supervise an employee in his trading on the NEX SEF. Specifically, a Morgan Stanley trader executed self-matched trades on the NEX SEF for the purpose of transferring positions between Morgan Stanley’s books under his control. The trader entered the opposing orders in his front-end trading system and received messages from Morgan Stanley’s intracompany transfer system, which incorrectly indicated that the transactions were internal. Due to failures in Morgan Stanley’s surveillance and supervision, the trader continued to execute self-matched trades in Indian Rupee, Indonesian Rupiah, Korean Won, Malaysian Ringgit, and Taiwan Dollar Non-Deliverable Forward products on the NEX SEF for several months, including after NEX SEF contacted Morgan Stanley regarding the trading at issue.

The Panel found that, as a result, Morgan Stanley violated NEX SEF (legacy) Rule 407(h).

PENALTY:

In accordance with the settlement offer, the Panel ordered Morgan Stanley to pay a $90,000 fine.