WASH­ING­TON-The New York Stock Ex­change (NYSE) will pay US$5 mil­lion to set­tle US civ­il charges that it gave cer­tain cus­tomers "an im­prop­er head start" on trad­ing in­for­ma­tion due to soft­ware is­sues and com­pli­ance fail­ures. The Se­cu­ri­ties and Ex­change Com­mis­sion's (SEC) case marks the agency's first fi­nan­cial penal­ty against a US ex­change and is part of its wider crack­down on ex­changes to make sure that re­tail in­vestors aren't harmed as high-speed trad­ing in­creas­ing­ly dom­i­nates mar­kets.

The SEC al­leges that be­gin­ning in 2008, some NYSE cus­tomers got an ear­ly look at trade or­der in­for­ma­tion that ranged from sin­gle-dig­it mil­lisec­onds to mul­ti­ple sec­onds. NYSE set­tled the case with­out ad­mit­ting or deny­ing the charges. In a state­ment, NYSE, which is op­er­at­ed by NYSE Eu­ronext, said the SEC was not al­leg­ing "any in­ten­tion­al mis­con­duct or that the NYSE da­ta de­lays caused any in­vestor harm."

The SEC's case hinges on al­leged vi­o­la­tions of a rule known as Reg­u­la­tion Na­tion­al Mar­ket Sys­tem, or REG NMS, which was adopt­ed in 2005 to en­sure cus­tomers get the best price and to pro­mote fair ac­cess to mar­ket da­ta. The rule pro­hibits ex­changes from im­prop­er­ly send­ing mar­ket da­ta to pro­pri­etary cus­tomers be­fore send­ing the in­for­ma­tion to the con­sol­i­dat­ed tape for broad­er use.

The SEC said that NYSE vi­o­lat­ed the NMS rule be­gin­ning in 2008 by send­ing da­ta through two of its pro­pri­etary feeds be­fore send­ing it to the con­sol­i­dat­ed feeds. The SEC does not al­lege that any in­vestors used the in­for­ma­tion to gain an un­fair edge.

Reuters