Published July 10, 2013
SAN FRANCISCO – Brokerage Newedge USA LLC has agreed to pay a $9.5 million fine to settle allegations by FINRA and U.S. stock exchanges that it failed to adequately monitor and prevent "potentially manipulative and suspicious trading activity" by high-speed traders on U.S. stock markets.
The sanctions came after the Financial Industry Regulatory Authority, the New York Stock Exchange , BATS Global Markets and other stock markets found the New York brokerage left it to clients to comply with exchange rules designed to prevent suspicious activity, according to descriptions of the proceedings in FINRA's Brokercheck database.
Two proceedings describing the problems were in the FINRA database and dated June 27 and July 2. The settlement has not been publicly announced.
Its own attempts at policing its clients, the regulators said, were "inconsistent and inadequate."
"In spite of red flags ... the firm did not take adequate steps to remedy these issues," the FINRA report said.
As a result of its lapses, the report said, Newedge allowed some firms to make illegal short sales during a temporary ban in 2008, and failed to prevent clients from "marking the close," when traders try to manipulate closing prices to their benefit.
Newedge is one of the world's biggest futures brokerages, but the sanctions did not involve that part of the business or any customers funds dedicated to it, a Newedge spokeswoman said.
The Wall Street Journal reported the settlement earlier on Wednesday.
(Reporting by Ann Saphir; Editing by Steve Orlofsky)