(Bloomberg) — U.S. regulators imposed a record fine on UBS Group AG's dark pool for failing to follow rules designed to ensure stock trades are executed fairly.
In ordering UBS to pay $14.4 million, including a $12 million fine that exceeds all prior penalties against an alternative trading system, the Securities and Exchange Commission flagged a series of violations from 2008 to 2012. It said UBS let customers submit orders at prices denominated in increments smaller than a penny, something SEC rules prohibit because it can be used to get a better place in line when buying or selling stock.
The ability to trade in sub-penny increments also wasn't widely disclosed to UBS customers, and was instead pitched secretly to market makers including high-frequency traders, according to the SEC.
"The UBS dark pool was not a level playing field for all customers and did not operate as advertised," Andrew J. Ceresney, the director of the SEC's Division of Enforcement, said in a statement Thursday. The SEC blamed both "technical problems" and two order types that effectively allowed orders to be priced in smaller-than-a-penny steps.
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