The Securities and Exchange Commission announced settled charges against the New York Stock Exchange LLC (“NYSE”) related to a January 2023 event in which NYSE failed to conduct opening auctions for more than 2,800 securities.
The SEC’s settled order finds that on January 24, 2023, NYSE failed to run opening auctions for over 2,800 securities due to a critical systems disruption. According to the SEC’s order, NYSE inadvertently ran its primary and backup trading systems simultaneously which led the primary trading system to incorrectly treat the opening auctions for more than 2,800 securities as having already occurred. As a result, NYSE did not run the opening auctions for the affected securities. The order finds that NYSE did not have written policies and procedures to monitor systems that support its opening auctions to determine if opening auctions had occurred, and NYSE was unaware of the full scope of the issues impacting opening auctions for nearly 90 minutes after the opening of trading. The order further finds that NYSE’s failure to conduct opening auctions for the aforementioned securities caused market-wide impacts including price-triggered restrictions on trading, market-wide trading pauses in 84 of the securities, and ultimately thousands of busted trades.
The SEC’s order finds that NYSE violated Rule 1001(a)(2)(vii) of Regulation Systems Compliance and Integrity (Regulation SCI), as well as Exchange Act Section 19(g)(1), which, among other things, requires national securities exchanges to comply with their own rules. Without admitting or denying the findings, NYSE agreed to be subject to a cease-and-desist order and to pay a civil penalty of $9 million.
The SEC’s investigation was conducted by Shannon Keyes of the New York Regional Office and Mandy B. Sturmfelz and Lindsay S. Moilanen of the Enforcement Division’s Market Abuse Unit. The matter was supervised by Joseph G. Sansone of the Market Abuse Unit and Sheldon Pollock of the New York Regional Office.
Source: SEC
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