NYSE Pays $4.5M to the SEC to Settle Allegations Over Compliance Failures, Exchange Rules Violations

The New York Stock Exchange and other entities have agreed to collectively pay $4.5 million to settle Securities and Exchange Commission allegations over regulatory and compliance violations. This includes the claim that there was a failure to abide by the duties of self-regulatory organizations to make sure their businesses follow federal securities laws and SEC-approved rules. Also facing charges are charged are NYSE Arca, NYSE Market, IntercontinentalExchange Inc. (ICE), which owns the NYSE, and Archipelago Securities, which is an affiliated routing broker.

As part of the agreement, the NYSE will get an independent consultant. All parties settled without denying or agreeing to the findings.

According to the regulator, the NYSE exchange took part in business practices that either violated exchange rules or engaged in certain actions that required such a rule where none existed. For example, the exchange used an error account that Archipelago maintained to trade out of certain securities positions even though there were no rules that allowed for the use of this type of account. Other violations alleged include those involving the Securities and Exchange Act of 1934 over numerous acts of purported misconduct, including:

• Providing customers with colocation services on disparate contractual terms with no exchange rule that allowed for these services.
• Operating a block trading facility that didn’t run according to approved rules.
• Distributing an automated feed of closing order imbalance data to floor brokers earlier than NYSE rules specify.

NYSE Arca is accused of not executing Mid-Point Passive Liquidity Orders in markets that were locked, which was counter the exchange rule in effect. Also, the Commission says that Archipelago did not set up policies that would reasonably allow it to stop the wrongful use of nonpublic, material data over error account trading. It also did not tell the SEC in a timely manner that the net capital rule, which exists to make sure that dealers and brokers can fulfill their financial duties and stay solvent, was violated.

NYSE is a self-regulatory organization. This means it makes its own rules and then submits them for SEC approval. In 2012, it paid $5 million for rule violation because it gave customers trading information before making the data available to the public.

Please contact The SSEK Partners Group if you suspect you were the victim of institutional investor fraud.

SEC Charges NYSE, NYSE ARCA, and NYSE MKT for Repeated Failures to Operate in Accordance With Exchange Rules, NYSE, May 1, 2014

SEC Fires First Shots Since ‘Flash Boys’ With NYSE Fine, Bloomberg, May 2, 2014

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