New York Stock Exchange Settles Case Over Early Data Access

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The New York Times
Saturday, September 15, 2012

New York Stock Exchange Settles Case Over Early Data Access

By BEN PROTESS

In the latest federal action against a major exchange, the New York Stock Exchange settled accusations on Friday that its trading data gave select clients a split-second advantage over retail investors.

The Securities and Exchange Commission issued a civil enforcement action citing the Big Board for "compliance failures" that allowed certain customers to receive stock data before the broader public. The improper actions, which began in 2008, ran afoul of safeguards set up to promote fairness in a system known for favoring elite investors.

The S.E.C. forced the exchange to adopt a battery of internal controls and pay a $5 million penalty. While the fine is a token sum for the country's biggest and most prominent trading platform, it represents the first penalty the agency has levied against an exchange.

"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," Robert Khuzami, the agency's enforcement director, said in a statement. "That is why S.E.C. rules mandate that exchanges give the public fair access to basic market data."

In a statement, the Big Board played down the significance of the action. The S.E.C., the exchange noted, did not unearth intentional wrongdoing or evidence that the problems harmed individual investors. Instead, the exchange blamed the lapses on "technology issues," which it said had since been fixed.

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