Tags: NYSE | SEC | Data | Probe

NYSE in Talks With SEC to Settle Data Probe

Monday, 06 Aug 2012 04:30 PM

 

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The New York Stock Exchange said on Monday it is in talks with U.S. securities regulators to settle allegations that the exchange violated rules intended to promote fair competition.

The Securities and Exchange Commission's investigation centers on a regulation that prohibits an exchange from sending out data on a private feed to certain clients faster than on public data feeds.

The company confirmed the negotiations after Reuters reported on the settlement talks earlier on Monday, citing people familiar with the matter. Those people spoke anonymously because the probe had not been made public.

"NYSE Euronext has been working with the SEC to resolve alleged violations of Rule 603(a) of Regulation NMS, a technical rule governing the timing of delivery of certain exchange market data," the company confirmed in a statement. "The company does not expect that any settlement of this matter will be material."

The case stems from an alleged violation of the regulation that governs the dissemination of market information, known as Regulation NMS, or national market system.

It is still unclear whether the SEC will ask NYSE to pay a fine to resolve the allegations. The case is still likely a few months away from being completed, people familiar with the matter told Reuters earlier on Monday.

The settlement talks come during a period of renewed focus by the SEC about the vulnerability of the markets to super-fast computer-driven trading and fears that some market participants are getting an unfair advantage.

The SEC is just beginning to grapple with the fallout from last week's software glitch that caused a $440 million trading loss for Knight Capital and the recent technology debacle at the Nasdaq OMX in handling the initial public offering for social networking giant Facebook.

The series of technological mishaps have only served to weaken investor confidence, something that took a big hit in the wake of the financial crisis.

The SEC ramped up its focus on market structure issues like the one at the heart of the NYSE probe in the wake of the May 6, 2010, "flash crash" in which the Dow Jones Industrials plunged about 700 points in several minutes.

Earlier this year, the SEC's market abuse specialized unit disclosed it was conducting roughly 20 different inquiries, ranging from order types to how exchanges police their markets.

According to another person familiar with the matter, the private data feeds at issue in the NYSE probe only gave certain clients an advantage that amounted to milliseconds. The person also said the SEC's investigation into NYSE did not stem from events in the flash crash.

But critics say in the world of high-speed trading, that can be enough to give some investors an advantage.


© 2014 Thomson/Reuters. All rights reserved.

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