U.S. Markets

SEC fines NYSE $14 million for regulatory violations

(Reuters) - The U.S. Securities and Exchange Commission on Tuesday fined Intercontinental Exchange Inc's ICE.N New York Stock Exchange and two affiliate exchanges a total of $14 million for multiple regulatory failures related to disruptive market events. 

The charges stemmed from five separate investigations and include the first-ever charge for violating Regulation Systems Compliance and Integrity (Reg SCI), the sweeping set of business continuity and disaster recovery regulations adopted by the SEC in late 2014, the regulator said in a statement.

The NYSE’s violations included erroneously implementing a market-wide regulatory halt and negligently misrepresenting stock prices as “automated” despite extensive system issues ahead of a total shutdown, the SEC said.

“For retail investors to have confidence in our markets, exchanges must provide accurate information and comply with legal requirements, including being equipped for unexpected market disruptions,” Stephanie Avakian, co-director of the SEC’s enforcement division, said in the statement.

The regulator warned the NYSE just over a year ago that it was considering an enforcement action against the exchange in connection with nearly a four-hour trading halt on July 8, 2015 that was the result of a flawed software rollout.

The SEC on Tuesday also pointed to the extreme market volatility on Aug. 24, 2015, when a record intraday drop in the Dow Jones Industrial Average was worsened by a quick succession of nearly 1,300 temporary trading halts in various stocks and exchange-traded funds. The halts spread confusion among investors as to what was trading and whether they received fair prices for completed trades.

“We take our regulatory obligations seriously and remain focused on building and maintaining industry-leading technology and ensuring that our markets operate with the utmost integrity,” NYSE spokeswoman Kristen Kaus said in a statement on Tuesday.

Previous SEC enforcement actions against exchanges include a $14 million settlement in 2015 with BATS Global Markets, which is now owned by Cboe Global Markets CBOE.O, over charges that two exchanges acquired by BATS had given advantages to certain high-frequency trading firms.

In May 2013, the SEC penalized Nasdaq Inc NDAQ.O $10 million to settle charges stemming from mistakes made during Facebook Inc's FB.O initial public offering in 2012.

ICE shares were up 0.5 percent at $73.19 on Tuesday.

Reporting by John McCrank in New York and Eric Walsh in Washington; Editing by Andrea Ricci and Paul Simao