Two securities exchanges, the EDGA and EDGX echanges have agreed to pay a total $14 million to settle federal charges of giving inaccurate information to trading firms about the buy and sell orders they used. It is the largest penalty it had imposed on a U.S. stock exchange and the first case involving types of trading orders used.
The exchanges gave full information about their ranking of orders by price and other data to some of their trading firm members — including some high-frequency firms — but not to all of their firm members says the SEC . That created a risk that not all investors could understand how the orders worked, the agency said.
High-frequency trading firms, use computer algorithms to buy and sell stocks in millisecond. This account for a majority of stock trading volume and is the subject of potential laws to prohibit the practices where the high frequency firms get a jump on competitors by using computers to rapidly analyze market data and exploit minuscule price differences.
BATS Global Markets, took over the two exchanges as part of its acquisition early last year of trading platform Direct Edge. BATS was not targeted in the SEC action.
Jeffrey Newman represents whistleblowers