$4.5 M NYSE fine seen as first SEC salvo following 'Flash Boys' revelation

Since author Michael Lewis released his latest book about high-frequency trading entitled "Flash Boys," the US Securities and Exchange Commission has responded to potential violations by entities and traders in the niche market by imposing a $4.5 million penalty on the New York Stock Exchange. Bloomberg said the penalty was applied for the trading exchange's alleged failure in formulating or ignoring rules that govern on how traders connect computers to when the pricing information are distributed to floor brokers. The news agency noted that the penalty would be the fifth time the regulator has imposed on a US exchange.

Although the penalty on NYSE, which as bought by IntercontinentalExchange Group Inc last year, is being debated on by everybody in the market structure, it was clear that the regulator intends to make a statement that it is intensifying its oversight efforts. Bloomberg noted that the regulator's allegations lodged against NYSE were years-old and were mostly procedural.

The SEC said in a statement, "The order highlights instances where the exchanges conducted business without a rule in place due to weak or inadequate policies and procedures. In other instances, the exchanges did not operate in compliance with their effective rules. Both failures reflect a troubling lack of compliance with the requirements and obligations imposed on securities exchanges."

President Dave Lauer of consulting firm Kor Group LLC said in a phone interview yesterday, "When you compare it to the $5 million NYSE paid in the data feeds settlement the amount of this fine is a big deal. At the end of the day, the SEC is making a statement. This is the way they operate now."

On the other hand, it was not the first time NYSE had to pay a fine for violations. In September 2012, the trading exchange had shelled out $5 million for providing preferred customers trading data before the public.

Tags

US Securities and Exchange Commission, Flash Boys, New York Stock Exchange, IntercontinentalExchange Group

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