WASHINGTON, D.C. — ITG Inc. and its affiliate, AlterNet Securities Inc., will pay $12 million to resolve allegations by the federal government that the company misled POSIT "dark pool" subscribers and did not initiate "safeguards and procedures" regarding private trading information.
According to the Securities and Exchange Commission (SEC), ITG led its POSIT subscribers to believe their trading information was confidential. However, the SEC says, the company sent "daily Top 100 Reports" on trading activity that showed the orders for 100 top stocks.
The SEC said ITG told "high-frequency trading firms" they could utilized the reports to find "potential unsatisfied liquidity needs in the dark pool." The SEC also alleges ITG left out the dark pool's vital features and split the pool in two, which stopped some orders in the pools from interacting and did not reveal the separate pools.
“Contrary to assurances it made to dark pool subscribers, ITG failed to ensure that trading information was protected and, in some instances, used this information to attempt to grow its business,” said Joseph Sansone, the SEC Enforcement Division’s market abuse unit chief, in a statement. “Our agency continues to scrutinize dark pools to ensure they protect client trading information and operate in compliance with the securities laws.”
ITG and AlterNet will stop any future violations in addition to paying the $12 million penalty, the SEC said.