SEC Charges Tech Group with Operating Secret Trading Desk and Misusing Dark Pool Subscriber Trading Information

In a settlement with an alternative trading system, the SEC announced that a tech group and its affiliate agreed to pay $20.3 million to settle charges that it operated a secret trading desk and misused the confidential trading information of dark pool subscribers.

An SEC investigation found that despite telling the public that it was an "agency-only" broker whose interests didn't conflict with its customers, the company operated an undisclosed proprietary trading desk known as "Project Omega" for more than a year. While the company claimed to protect the confidentiality of its dark pool subscribers' trading information, Project Omega accessed live feeds of order and execution information of its subscribers and used them to implement high-frequency algorithmic trading strategies.

The SEC order found that the company violated Sections 17(a)(2) and (3) of the Securities Act of 1933 in connection with Project Omega by engaging in a course of business that operated as a fraud and failed to make disclosures about Project Omega and its proprietary trading activities. Additionally, the company violated Rules 301(b)(2) and 301(b)(10) of Regulation ATS by failing to amend its Form ATS, failing to establish adequate safeguards and failing to implement adequate oversight procedures to protect the confidential information of POSIT subscribers.

See: SEC Charges Tech Group with Operating Secret Trading Desk and Misusing Dark Pool Subscriber Trading Information. Related news: NFA Business Conduct Committee Bars Firm and its Principal from Membership (August 11, 2015); Investment Management Firm Settles Charges That It Failed to Disclose Conflict to Clients (August 10, 2015); Consumer Finance Protection Bureau Sues Offshore Payday Lender (August 5, 2015).