US high-speed trading firm fined $16m for low capital

GMT 19:50 2014 Wednesday ,17 September

Arab Today, arab today US high-speed trading firm fined $16m for low capital

Wall Street in New York
New York - AFP

 US regulators fined a high-frequency trading firm $16 million for violating minimum capital requirements, a record sanction for such a violation, the Securities and Exchange Commission announced Wednesday.
Latour Trading agreed to the penalty to settle the charges after regulators discovered the New York-based company held inadequate capital to cover very large trading positions on 19 of 24 dates investigated in a two-year stretch.
The prior record fine for such a violation was $400,000.
During the 2010-2011 period, Latour's transactions at times accounted for as much as nine percent of the trading volume in equity securities for the entire US market, the SEC said.
The rule "is critical to ensuring that broker-dealers are able to sustain their businesses and that investors are protected," said Andrew Ceresney, director of the SEC's enforcement division, in a statement.
"These penalties demonstrate both the seriousness of the conduct here and the increase more generally in our penalties across the board."
Broker-dealers are required to hold a minium level of capital to meet obligations to customers and counterparties and to have sufficient additional resources to wind down the business in an orderly fashion if the firm fails.
Latour's violations centered on its failure to make correct deductions based on its trades, leading it to understate its risk and inflate its capital position by as much as $28 million, the SEC said.
The agency also fined Nicholas Niquet, the chief operating officer at Latour when the violations began. Niquet agreed to pay $150,000 to settle the charges, the SEC said.
Ceresney, in a conference call with reporters, said the high-priced settlement does not signal any special crackdown targeting high-frequency trading firms, but was part of the ongoing investigation by the SEC and other regulators of high-speed transactions.
Critics say that high-frequency traders skim profits from clients who order a stock at one price, only to end up paying more than the quoted amount after the firm pushes up the price through a series of lightning-quick transactions.
Latour is owned by New York-based Tower Research Capital, a financial services firm that bills itself as a specialist in quantitative trading and investment strategies, including the development of proprietary trading algorithms.
Tower did not have an immediate comment.


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