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SEC charges New York Stock Exchange for violation of rules




by Joseph Earnest  May 5, 2014


Newscast Media WASHINGTONThe Securities and Exchange Commission has 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 NYSE exchanges agreed to settle the SEC's charges by retaining an independent consultant and together with Archipelago Securities paying a $4.5 million penalty. 


"The SEC regulates exchanges, in part, by reviewing rules proposed by the exchanges that govern exchange activities and allow market participants to decide how and where to place orders," said Andrew J. Ceresney, director of the SEC's Division of Enforcement.  "We will hold exchanges accountable if they fail to have rules governing their operations or fail to follow them."


As SROs, the NYSE exchanges are required to conduct their operations in accordance and compliance with their own rules as well as the federal securities laws.  They are required to file all proposed rules and rule changes with the Commission, which publishes them for public comment, before they take effect.  This transparency enables all participants trading on the exchanges to understand how their orders are processed and executed.    


Now wholly-owned subsidiaries of IntercontinentalExchange Inc., NYSE, NYSE Arca, NYSE MKT, and Archipelago Securities have consented to the SEC's order without admitting or denying the findings.  They agreed to collectively pay the penalty of $4.5 million, and the NYSE exchanges agreed to complete significant undertakings including retaining an independent consultant to complete a comprehensive review of their policies and procedures.

The entire SEC can be read or downloaded here. (pop-up)

The SEC's investigation was conducted by Jason Litow, Vinyard Cooke, and Kevin Gershfeld.  The case was supervised by Yuri Zelinsky and Antonia Chion.

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