(Updates with comment from interview)
By Herbert Lash
NEW YORK, Sept 13 A small New York brokerage
and 11 of its employees agreed to a $2.26 million settlement
for inducing unsuspecting counter-parties to enter stock trades
at illegitimate prices, U.S. regulators said on Monday.
Traders at Trillium Brokerage Services repeatedly entered
numerous non-bona fide "layered" orders to create the
appearance of substantial pending buying or selling interest,
said the Financial Industry Regulatory Authority, or Finra.
The case, which came to light after a complaint to Nasdaq,
is the first involving "layering" in the United States that
Finra is aware of, said Thomas R. Gira, executive vice
president of market regulation at the industry regulator.
""We do have other active cases. This is not an isolated
case," Gira said, who added that Finra created a surveillance
program to monitor all markets for the activity.
Traders at the firm formerly known as Trillium Trading were
fined and suspended from the industry for six months to two
years for taking advantage of algorithmic trading programs at
other firms during the three months that ended Jan. 31, 2007.
"Trillium's trading conduct was designed to improperly bait
unsuspecting market participants into executing trades at
illegitimately high or low prices," Gira said earlier in a
The Trillium traders placed and then canceled multiple
orders within seconds before a real order was entered to profit
from artificially inflated or deflated stock prices on at least
46,152 occasions, Finra said.
Trillium and the 11 respondents in the case neither
admitted nor denied the charges.
Regulators are looking for possible fraud related to the
large number of rapid-fire stock orders that are placed and
canceled almost immediately, Securities and Exchange Commission
Chairman Mary Schapiro said last week.
(Editing by Leslie Adler)