A business unit of Citigroup will pay US$5 million to settle civil charges that one of its private trading venues violated federal law by failing to protect clients' confidential trading data, US regulators said yesterday.The Securities and Exchange Commission said the unit, LavaFlow Inc, is settling the case without admitting or denying the charges.
The LavaFlow trading venue failed to put adequate safeguards and procedures in place to protect its subscribers' confidential trading information from March 2008 through March 2011, the SEC said in a statement.Another Citigroup affiliate was able to access LavaFlow's subscribers' confidential trading information to decide where to route certain orders, the regulator said.An attorney for LavaFlow did not immediately respond to an e-mail seeking comment.
The case marks the latest in a string of SEC enforcements in recent years that have targeted alternative trading systems (ATS), a type of trading platform that competes with traditional exchanges.In early June, ATS operator Liquidnet paid US$2 million to the SEC to settle charges that it had improperly used its subscribers' confidential trading information to market its services.
On July 1, Goldman Sachs agreed to pay an US$800,000 fine to the Financial Industry Regulatory Authority (FINRA) to settle a case over pricing rule violations in its ATS. The SEC said the Citigroup case represents the largest-ever penalty imposed so far on an alternative trading system. (Reuters)