High-Speed Enforcement: SEC Hits New York Stock Exchange With Fine

The morning release from the Securities and Exchange Commission caused me, and a lot of other folks, a double-take as we saw our inbox message fields: "SEC CHARGES NEW YORK STOCK EXCHANGE FOR"

In a historic first, the world's largest exchange is charged with giving out data to proprietary clients before the general public. No one leaked information; rather, the speed of the feed to the insiders was faster than the speed of the feed to the rest of us.

How much faster? It doesn't matter. What's happening here is that the SEC is going after the built-in unfairness of ultra-high-speed trading, which accounts for a growing number of trades.

"Improper early access to market data, even measured in milliseconds, can in today's markets be a real and substantial advantage that disproportionately disadvantages retail and long-term investors," said Robert Khuzami, Director of the SEC's Division of Enforcement.

As market abuse unit chief Daniel Hawke put it, "The violations at NYSE may have been technological, but they were not technical."

NYSE is slapped with a censure and a $5 million fine, is ordered to halt the practice, which allegedly started in 2008, and must hire a consultant to make sure it doesn't happen in the future.

The problem, SEC said, is that NYSE's compliance department was not involved in the design of the system to begin with. Most any NYSE-traded company could have told the exchange that's a problem, after Enron and Sarbanes-Oxley.

Instead, NYSE gets slapped with its first-ever SEC fine in shenanigans that started exactly as this stuff was supposedly being cleaned up. Maybe Eliot Spitzer was right.

Featured Stories

CTnow is using Facebook comments on stories. To comment on ctnow.com articles, sign into Facebook and enter your comment in the field below. Comments will appear in your Facebook News Feed unless you choose otherwise. To report spam or abuse, click the X next to the comment. For guidelines on commenting, click here.



Business Midday Get daily business news sent directly to your inbox for free weekdays at 1 p.m.

After signing in, click on your username at the top left of this screen and then on "My Newsletter Subscriptions."