The Securities and Exchange Commission (SEC) announced Friday that it has brought first-of-their-kind charges against the New York Stock Exchange for unfairly giving certain customers an improper head start on trading information.
The SEC charged that the NYSE failed to comply with restrictions on the distribution of trade and quote data that are intended to ensure the public has fair access to current market information.
NYSE and its parent company, NYSE Euronext, agreed to a $5 million penalty and system changes to settle the SEC’s charges.
Specifically, SEC Rule 603(a) of the National Market System (NMS) regulation prohibits the practice of sending market data to proprietary customers before sending that data in consolidated feeds that widely distribute trade and quote data to the public. The NMS rule is designed to ensure that the public has equal access to current market information about the best displayed prices for stocks and trades.
“Improper early access to market data, even measured in milliseconds, can in today’s markets be a real and substantial advantage that disproportionately disadvantages retail and long-term investors,” said Robert Khuzami, director of the SEC’s division of enforcement, in a statement. “That is why SEC rules mandate that exchanges give the public fair access to basic market data. Compliance with these rules is especially important given exchanges’ for-profit business interests.”