The NASD today announced it has reached a settlement with Swift Trade Securities USA, Inc. and its president, Peter Beck, for engaging in a deceptive trading scheme involving fictitious “wash” transactions in the Nasdaq-100 Index Tracking Stock to generate market data revenue.

Swift USA and Beck were censured and fined, jointly, US$75,000 and were required to give up US$26,000, the profits from the fictitious wash sales. NASD suspended Beck for 30 business days in all capacities as well as censuring and fining Joseph Ianni, vice president of
compliance and Swift USA jointly, $25,000 for inadequate supervision. As part of the settlement, all respondents neither admit nor deny any wrongdoing.

From April 2002 through May 2002, Swift USA, a NASD-registered brokerage firm based in Toronto, operated a computer software program that simultaneously routed offsetting limit orders for the Nasdaq-100 to The Island ECN, Inc. The orders were solely for the account of Swift USA’s only customer and Canadian-registered counterpart, Swift Trade Securities, Inc. Because Swift USA executed these orders for a single customer at the same price and quantity on both sides of the market, there was no change in Swift Canada’s ownership of the shares. Fictitious transactions that do not result in a change of ownership are illegal.

The NASD found that Swift USA, through Beck, violated NASD rules by executing these “wash” transactions through Island to profit from market data revenue sharing provided by Island to its subscribers. Meanwhile, Swift Canada has no risk of profit or loss from the transactions. As a result of this trading strategy, Swift USA received approximately $26,000 in illegal data revenue. Joseph Ianni, as well as Swift USA, was found to have inadequately supervised the trading activities.