The US Securities and Exchange Commission (SEC) has imposed a fine of $5m on the New York Stock Exchange for failing to comply with the norms and thus giving undue advantage to a few customers by sharing trading information.
NYSE has agreed to settle charges by paying the aforesaid penalty, marking a first-ever SEC financial penalty against an exchange, the US financial regulator said.
The rule NMS (National Market System) laid by SEC prohibits inappropriate dispatch of market data, which ensures that the public has fair access to current market information about the best displayed prices for stocks and trades that have occurred.
The US watchdog during its investigation found that the exchange breached this Rule 603(a) of SEC Regulation NMS, over an extended period of time beginning in 2008.
During the aforesaid period, it continued sending data through two of its proprietary feeds before sending data to the consolidated feeds, said SEC.
NYSE’s inadequate compliance efforts failed to monitor the speed of its proprietary feeds compared to its data transmission to the consolidated feeds.
SEC’s Division of Enforcement Director Robert Hisami said 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.
"That is why SEC rules mandate that exchanges give the public fair access to basic market data. Compliance with these rules is especially important given exchanges’ for-profit business interest," Khuzami
SEC Enforcement Division’s Market Abuse Unit Chief of theDaniel M Hawke added, "The violations at NYSE may have been technological, but they were not technical. Robust technology governance is just as important to preventing investor harm as any other compliance or supervisory function."
The SEC’s Division of Trading and Markets Director Robert W Cook said, "Market data is the lifeblood of the national market system."
"Our rules require exchanges to distribute information on quotes and trades to the consolidated data processors on terms that are ‘fair and reasonable’ and ‘not unreasonably discriminatory."
The SEC’s investigation was conducted by members of the Enforcement Division’s Market Abuse Unit including William Max Hathaway, David Herman, Ainsley Kerr, and Robert Cohen, and supervised by the unit’s chief Daniel M Hawke and deputy chief Sanjay Wadhwa.