BD Pays $13 Million to Settle Charges that It Catered to HFTs
A large broker-dealer agreed to pay nearly $13 Million to settle charges that it misled institutional customers about the operation of its dark pool and failed to register as an exchange or an ATS. The SEC alleges that the broker-dealer, contrary to marketing and other representations, allowed high frequency traders into its dark pool. According to the SEC, the HFTs represented more than 17% of all execution during the relevant 3-year period. The SEC also faults the firm for routing orders to external venues that charged less for execution without passing the lower cost to clients. The SEC also charges that the dark pool should have registered as a national securities exchange.
OUR TAKE: Apparently, the prosecutions of dark pools and high frequency traders have not ended. The SEC has focused on the trading venues as a backdoor way to regulate HFTs.