May 1, 2014
It is somewhat ironic, actually make that criminal, that two days after new SEC head Mary Jo White (whose conflict of interest list is so vast courtesy of her prior position as defending every Wall Street from their criminal acts she now has to recuse herself from virtually every enforcement action) solemnly promised Congress under oath that the “markets are not rigged”, the SEC comes out swinging and slaps the wrist of the NYSE with an intolerable $4.5 million fine for allowing market rigging “for a period of time from 2008 to 2012.”
From the SEC complaint:
The Securities and Exchange Commission today announced an enforcement action against the New York Stock Exchange and two affiliated exchanges for their failure to comply with the responsibilities of self-regulatory organizations (SROs) to conduct their business operations in accordance with Commission-approved exchange rules and the federal securities laws. Also charged was the NYSE exchanges’ affiliated routing broker Archipelago Securities.
“The order highlights instances where the exchanges conducted business without a rule in place due to weak or inadequate policies and procedures,” said Antonia Chion, an associate director in the SEC’s Division of Enforcement. “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.”
The violations detailed in the SEC’s order occurred during periods of time from 2008 to 2012. The SEC’s order finds that the NYSE exchanges violated Section 19(b) and 19(g) of the Securities Exchange Act of 1934 through misconduct that included the following:
- NYSE, NYSE Arca, and NYSE MKT (formerly NYSE Amex) used an error account maintained at Archipelago Securities to assume and trade out of securities positions without a rule in effect that permitted such trading and in a manner inconsistent with their rules for the routing broker, which limited Archipelago Securities’ activity primarily to outbound and inbound routing of orders on behalf of those exchanges.
- NYSE provided co-location services to customers on disparate contractual terms without an exchange rule in effect that permitted and governed the provision of such services on a fair and equitable basis.
- NYSE operated a block trading facility (New York Block Exchange) that for a period of time did not function in accordance with the rules submitted by NYSE and approved by the SEC.
- NYSE distributed an automated feed of closing order imbalance information to its floor brokers at an earlier time than was specified in NYSE’s rules.
- NYSE Arca failed to execute Mid-Point Passive Liquidity Orders (MPLOs) in locked markets (where the bid and ask prices are the same) contrary to its exchange rule in effect at the time.
In addition, the SEC’s order finds that NYSE Arca accepted MPLOs in sub-penny amounts for National Market System stocks trading at over $1.00 per share, in violation of Rule 612(a) of Regulation NMS.
The SEC’s order further finds that Archipelago Securities failed to establish and maintain policies reasonably designed to prevent the misuse of material, nonpublic information in connection with error account trading. Archipelago Securities also violated and failed to give the SEC timely notice of its violation of the net capital rule – a critical federal securities law provision intended to ensure that brokers and dealers remain solvent and can meet their financial obligations.
Or in other words, the SEC is claiming that for 5 years the NYSE was aiding and abetting the very same rigged market that the SEC swears does not exist.
Gold Goliath is not your typical gold dealer.