NYSE Euronext, Inc. (NYSE: NYX) is settling an SEC charge for what may be nothing more than a slap on the wrist. The Securities and Exchange Commission today brought what is the first ever charge for compliance failures that gave certain customers an improper head start on trading information. In short, this is basically front-running of orders.
The penalty is so small that you have to wonder if it was even a penalty at all. NYSE and its parent company NYSE Euronext have agreed to pay a $5 million penalty “and significant undertakings to settle the SEC’s charges.” This was also called the first-ever SEC financial penalty against an exchange.
The SEC’s release shows that Regulation NMS prohibits improperly sending market data to proprietary customers before sending that data to consolidated feeds which distribute trading and quote data to the public. The aim is to give the public fair access to current market information about the best displayed prices for stocks and trades that have occurred.
Today’s charge said that the NYSE violated this rule over an extended period of time “beginning in 2008 by sending data through two of its proprietary feeds before sending data to the consolidated feeds. NYSE’s inadequate compliance efforts failed to monitor the speed of its proprietary feeds compared to its data transmission to the consolidated feeds.”
At issue were two feeds. Open Book Ultra was listed first, and it sends real-time data about NYSE’s entire order book. PDP Quotes was listed next and it contains NYSE’s quote for each security.
Is it any coincidence that NYSE shares are up 2.5% at $26.92 on the day? Perhaps, but for a company that has a market value of $6.6 billion this $5 million is such a small amount that it might as well be considered a victory.
Here is a graphic put together by the SEC:
JON C. OGG