* Traded ahead of customers between 1999 and 2005
* E*Trade to pay $34 million
* Six firms to pay total of $42 million (Corrects figure in bullet point and 1st paragraph to $34 mln from $40 mln)
NEW YORK, March 5 (Reuters) - Online broker E*Trade Financial Corp (ETFC.O) will pay nearly $34 million after U.S. regulators ruled its unit was among six firms that improperly executed trades ahead of customer orders, known as front running, between 1999 and 2005.
The unit, E*Trade Capital Markets LLC, and five other firms, “failed to meet their basic obligation as specialists to serve public customer orders over their own proprietary interests while executing trades” on the Chicago Stock Exchange, the Securities and Exchange Commission said late on Wednesday.
The five other firms that were served the civil injunction were: Automated Trading Desk Specialists LLC, Melvin Securities LLC, Melvin & Company LLC, Sydan LP, and TradeLink LLC. The six firms agreed to pay $42 million in total, the SEC said.
E*Trade, which has suffered a string of quarterly losses due to its deteriorating mortgage business, said in an SEC filing it “neither admitted nor denied the allegations,” but would pay the $28.3 million charge and another $5.7 million civil penalty. (Reporting by Jonathan Spicer, Editing by Maureen Bavdek)