On March 6, the Securities and Exchange Commission announced that it has charged the New York Stock Exchange and two affiliated exchanges with regulatory failures in connection with multiple episodes, including several disruptive market events. The charges arose from five separate investigations and include the first-ever charged violation of Regulation SCI.
The Commission adopted Regulation SCI to strengthen the technology infrastructure and integrity of the U.S. securities markets. Two NYSE exchanges were charged with violating its business continuity and disaster recovery requirements. In settlement, the exchanges agreed to pay a $14 million penalty.
According to the SEC’s order, the violations include erroneously implementing a market-wide regulatory halt, negligently misrepresenting stock prices as “automated” despite extensive system issues ahead of a total shutdown of two of the exchanges, and applying price collars during unusual market volatility on Aug. 24, 2015, without a rule in effect to permit them, a move that resulted in order imbalances being resolved more slowly.
The SEC’s order also found, among other things, that the NYSE exchanges broke rules regarding business continuity and disaster recovery in violation of Regulation SCI and also violated Regulation NMS.
NYSE, NYSE Arca, and NYSE American neither admitted nor denied the findings in the SEC’s order, which includes more specific details about the charges.