SEC Charges Firm with Failures in Operating Dark Pool

The SEC charged UBS Securities, LLC ("UBS") with disclosure failures and other securities law violations pertaining to the operation and marketing of its dark pool.

According to the SEC, the firm failed to properly disclose to all of its dark pool subscribers the existence of an order type used by clients that were market makers and high-frequency trading firms ("HFTs"). The order type at issue allowed clients to submit orders that improved upon the national best bid or offer by a percentage of the current spread. In certain circumstances, the SEC found that this resulted in orders being executed on UBS's dark pool in sub-penny increments, in violation of Regulation NMS Rule 612. Furthermore, according to the SEC, the firm failed to properly disclose a "natural-only crossing restriction" developed to ensure that certain orders would not execute against "non-natural" order flow.

See: SEC Order.