US Securities and Exchange Commission (SEC) has charged Boston based dark pool operator eBX LLC for failing to safeguard the private trading information of its subscribers.
The market regulator accused the firm for not informing to all subscribers that it has granted permission to an outside company to use their confidential trading information.
SEC accused that eBX also failed to disclose the same in its filings with the regulator that it has permitted LeveL subscribers’ unexecuted order information to be shared outside.
Alternative trading system LeveL (ATS), also known as "dark pool" trading program, do not exhibit quotations to the public and offer subscribers with access to potential trade opportunities than other investors using public markets.
The accused trader informed its subscribers that their flow of orders to buy or sell securities would be kept secret and on the contrary allowed an outside firm to use information about unexecuted orders for its own business purposes.
Due to this, the outside firm’s separate order routing business received an information gain over other LeveL subscribers to leak confidential information, claims the US watchdog.
SEC Division of Enforcement Director Robert Khuzami said, "Many eBX subscribers didn’t get the benefit of that bargain – they were unaware that another order routing system was given exclusive access to trading information that it used for its own benefit."
eBX has agreed to pay a fine of $800,000 to settle the charges as well as to stop and discontinue further breach of certain provisions of the federal securities laws regulating alternative trading systems.
The investigation was conducted by members of the Enforcement Division’s Market Abuse Unit including William Max Hathaway, David Herman, Ainsley Kerr, and Robert Cohen.