- Posted January 19, 2015
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UBS unit paying $14.4M to settle charges
WASHINGTON (AP) - A unit of the big Swiss bank UBS has agreed to pay about $14.4 million to settle U.S. civil charges of failing to give investors full information about its so-called "dark pool" trading system.
Unlike public stock exchanges, dark pools are private, off-market trading platforms. The Securities and Exchange Commission announced the settlement last Thursday with UBS, Switzerland's largest bank and a major Wall Street institution.
UBS neither admitted nor denied the allegations. UBS also was censured, bringing the possibility of a stiffer sanction if the alleged violation is repeated.
The company agreed to pay about $2.4 million in restitution and interest plus a $12 million penalty - the SEC's largest against an alternative trading system. Alternative trading systems make stock trades for brokerage firms and other traders, competing with public stock exchanges.
Alternative trading systems include electronic communications networks, which display some order information such as best bid or offer, and dark pools, which don't show such data.
The SEC in recent months has accelerated its volume of market trading cases in the complex, highly fragmented securities markets.
The SEC said UBS Securities failed to fully disclose one of its types of orders that it marketed to selected traders and high-frequency trading firms.
High-frequency trading firms, which use computer algorithms to buy and sell stocks in milliseconds, now account for a majority of stock trading volume. They try to get a jump on competitors by using computers to rapidly analyze market data and exploit minuscule price differences.
The SEC didn't specify how widely investors used the UBS order type in question. It isn't known to what extent retail investors, through trading firms, have been disadvantaged by the alleged conduct of companies in these market structure cases. But officials say all market investors can be harmed by the lack of a level playing field.
"The UBS dark pool was not a level playing field for all customers and did not operate as advertised," SEC Enforcement Director Andrew Ceresney said in a statement.
UBS said in a statement that it is pleased to have resolved the SEC charges "arising from historical shortcomings in the operation" of the alternative trading system. "The issues that led to these charges were remedied in mid-2012, and the firm has updated and enhanced its supervisory and operational procedures," UBS said.
Last Monday, two securities exchanges that were owned by trading platform Direct Edge agreed to pay a total of $14 million to settle SEC charges of giving inaccurate information to trading firms about the buy and sell orders they used. The agency said it was the largest penalty it had imposed on a U.S. stock exchange and the first case involving types of trading orders used.
A market trading unit of Citigroup Inc. agreed last July to pay $5 million to resolve SEC charges of failing to protect the confidentiality of customer trading data. The Citigroup unit, called LavaFlow Inc., operates an electronic communications network.
Published: Mon, Jan 19, 2015
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