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NYSE assessed $5M penalty

By Michael P. Tremoglie | Sep 18, 2012

NEW YORK (Legal Newsline) - The Securities and Exchange Commission announced a first-of-its-kind penalty against the New York Stock Exchange on Friday.

The SEC alleged compliance failures gave certain customers an improper head start on trading information.

According to the SEC's order against NYSE, the exchange violated SEC Regulation National Market System, which prohibits the practice of improperly sending market data to proprietary customers before sending that data as consolidated feeds, which broadly distribute trade and quote data to the public.

This rule was violated repeatedly "over an extended period of time beginning in 2008 by sending data through two of its proprietary feeds before sending data to the consolidated feeds," the SEC said.

NYSE and its parent company NYSE Euronext will pay a $5 million penalty and significant undertakings to settle the SEC's charges. It marks the first-ever SEC financial penalty against an exchange. The disparities in data release times ranged from single-digit milliseconds to multiple seconds, the SEC said.

"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.

"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."

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