WASHINGTON – The New York Stock Exchange and three affiliates have agreed to pay a $4.5 million penalty to settle federal regulators’ charges that they repeatedly violated rules governing the handling of orders and other practices.
The Securities and Exchange Commission announced Thursday the settlement with the NYSE, its trading platforms NYSE Arca and NYSE MKT, and affiliated brokerage Archipelago Securities. The organizations also agreed to hire an independent consultant. The NYSE and the three affiliates neither admitted nor denied the SEC allegations.
The SEC said the rule violations occurred from 2008 to 2012. They included operating a facility for trading blocks of stocks in a manner that didn’t comply with the rules for a period of time, according to the SEC. In another case, the NYSE allegedly allowed some customers to operate their computer trading systems under different terms from others.
The NYSE “failed to live up to its obligations” by failing to comply with its own rules in some cases and not having rules in other cases where it should, SEC Enforcement Director Andrew Ceresny told reporters in a conference call.
The NYSE operates as a so-called self-regulatory organization, which requires it to comply with operating rules and also to monitor the compliance of companies that are members of the exchange.
The SEC did not allege that the NYSE’s conduct harmed investors. But it said that some of the alleged violations, such as the differing terms for trading systems, could unfairly benefit some traders over others in the absence of a rule to ensure fair treatment.
The SEC has been investigating the practice of co-location, in which high-speed trading firms rent computer space close to an exchange’s system. At issue is whether by enabling those firms to receive trading data more quickly, co-location gives them an unfair advantage over other traders.
The NYSE and the affiliates are owned by the futures exchange IntercontinentalExchange, known as ICE. ICE acquired parent company NYSE Euronext, which also included stock exchanges in Europe, in November for about $8 billion.