N.Y.S.E. Settles Regulatory Action on Trading Data

The New York Stock Exchange on Friday settled accusations that its trading data gave select clients a leg up over retail investors, the latest federal action against a major exchange.

In a civil enforcement action, the Securities and Exchange accused the Big Board of “compliance failures” by allowing paying customers to receive certain stock data milliseconds before the broader public. The improper actions, which unfolded from 2008 to 2010, ran afoul of safeguards set up to promote fairness in a system already known for favoring elite investors.

The S.E.C. forced the Big Board to adopt a battery of internal controls and pay a $5 million penalty. While the fine is a token sum for the country's biggest and most prominent trading platform, the action represents the agency's first ever fine of an exchange.

“Improper early access to market data, even measured in milliseconds, can in today's markets be a real and substantial advantage that disproportiona tely disadvantages retail and long-term investors,” Robert Khuzami, the S.E.C.'s enforcement director, said in a statement. “That is why SEC rules mandate that exchanges give the public fair access to basic market data.”

In a statement, the N.Y.S.E. played down the importance of the action. The S.E.C., the exchange noted, did not unearth intentional wrongdoing. Instead, the exchange blamed “technology issues” for the lapses, problems that N.Y.S.E. says it has since fixed.

“NYSE Euronext is pleased to have this matter resolved, and believes that the settlement is in the best interest of its shareowners, clients and employees,” Duncan L. Niederauer, NYSE Euronext's chief executive, said in the statement. “We will continue to take every responsible measure to ensure that our market operates with the utmost fairness and transparency.”

The action against the Big Board is part of a wider federal crackdown on technology failures at the nation's biggest exchanges.

The S.E.C. is investigating Nasdaq for Facebook‘s botched public offering in May. The agency, which has penalized the Direct Edge exchange for having “weak internal controls,” is also pursuing the Chicago Board Options Exchange for not properly policing the markets.

BATS Global Markets has acknowledged receiving a request from the S.E.C., which is examining whether any collaboration between BATS and high-frequency trading firms could hinder competition. The agency is also examining BATS' own aborted public offering this year.