The Securities and Exchange Commission has charged a Citigroup business unit operating an alternative trading system with failing to protect the confidential trading data of its subscribers. New York-based LavaFlow, owned by Citigroup Financial Products, agreed to pay $5 million to settle the SEC’s charges, including a $2.85 million penalty that is the agency’s largest to date against an ATS.
An ATS is a venue that executes stock trades on behalf of broker-dealers and other traders. LavaFlow operates a type of ATS known as an electronic communications network, which unlike a dark pool displays some information about pending orders in its system, such as best bid or best offer. Alternative trading systems currently execute approximately 12 percent of the U.S. equity trading volume; LavaFlow is estimated to be a top 10 ATS when measured by share or trade volume.
