SEC Charges Firm with Violating Market Access Rule (with Lofchie Comment)

The SEC charged an investment firm with violating the market access rule in connection with a trading incident that resulted in the erroneous execution of options contracts.

An SEC investigation found that Goldman Sachs did not have adequate safeguards to prevent it from sending approximately 16,000 mispriced options orders to various options exchanges in less than an hour once the firm implemented new electronic trading functionality designed to match internal options orders with client orders.

Lofchie Comment: This kind of enforcement action is puzzling and ill-considered. In this case, a firm lost a significant amount of money in what appears to be an obvious technology screw-up. What benefit does the SEC bestow by tacking on a substantial fine? Wouldn't the losses sustained by the firm be enough motivation for it to develop better procedures without added enforcement penalties? Would it not be better for the SEC to encourage firms to come forward and disclose their own technology failures as moments from which to learn, instead of taking actions that may encourage a firm to keep silent about technology failure? It is hard not to note that the government itself does not do technology so well.

See: SEC Order.