New York Stock Exchange and others hit for $4.5 million
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New York Stock Exchange and others hit for $4.5 million 07 May 2014New York Reporter: Tammy Facey
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The Securities and Exchange Commission takes action against the New York Stock Exchange and others for failing to abide by the rules.
Failure to adhere to the rules has left the New York Stock Exchange, two affiliated exchanges, NYSE ARCA and NYSE MKT, and Archipelago Securities with a heavy penalty.
The parties have collectively agreed to settle the charges, brought by the US Securities and Exchange Commission (SEC), and pay a $4.5 million penalty.
Collectively, the four parties failed to uphold the responsibilities of self-regulatory organisations, and to conduct business according to SEC exchange rules and federal securities laws.
The violations occurred between 2008 to 2012. The SEC found the New York Stock Exchange violated Section 19(b) and 19(g) of the Securities Exchange Act 1934.
The New York Stock Exchange and its affiliated groups made a number of errors including failing to execute mid-point passive liquidity in a locked market.
They also used an error account maintained at broker Archipelago to feign trade out of securities positions without a rule in effect that permitted such trading.
Archipelago failed to secure its policies and prevent misuse of material, non-public information in connection with error account trading. They also failed to give the SEC timely notice of its violation of the net capital rule.
The SEC also found that the New York Stock Exchange distributed an automated feed of closing order imbalance information to its floor brokers earlier than was specified in their rules. The exchange also operated a block trading facility, which did not meet regulations.
The exchange also provided co-location services to customers on disparate contractual terms without an exchange rule in effect that governed such services on a fair basis.
While the parties have agreed to pay the penalty, they have not admitted liability for the charges, nor have they denied them.
The New York Stock Exchange has also agreed to reassess its policies to determine whether it complies with the SEC.
Andrew Ceresney director of the SEC’s enforcement division, commented: “We will hold exchanges accountable if they fail to have rules governing their operations or fail to follow them.”
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