CHX Responds To SEC Charges Of Six Former Specialist Firms

The Chicago Stock Exchange (CHX) today responded to the U.S. Securities and Exchange Commission’s (SEC) announcement that it filed settled civil injunctive actions against the following 6 former CHX specialist firms: Automated Trading Desk Specialists LLC; E*Trade Capital Markets LLC; Melvin Securities LLC; Melvin & Company LLC; Sydan LP; and TradeLink LLC.

According to the SEC’s complaints, the firms violated Exchange Article 9, Rule 17, which prohibits Participant firms from trading for their own account while holding unexecuted customer orders. The complaints also allege that the Defendants failed to make or keep current records pertaining to certain types of orders, in violation of Section 17(a) of the Exchange Act and Rule 17a-3(a)(1) thereunder. Without admitting or denying the allegations set forth in the complaints, the firms have consented to the entry of orders permanently enjoining them from engaging in the violations set forth above and have agreed to disgorge ill-gotten gains totaling in the aggregate over $35.7 million and pay civil penalties totaling more than $6.7 million.

"The violations alleged in the SEC’s complaints directly undermine the public’s confidence in the integrity of the financial markets. As a Self Regulatory Organization, we take any violations of Exchange rules or federal securities laws very seriously," said David Kelly, the Chairman of the Exchange’s Regulatory Oversight Committee.

Kelly added, "Although the Commission’s actions involve violations associated with the old CHX specialist system, which is no longer in use under the current CHX market structure, the Exchange has and will continue to work closely with the Commission to protect all market participants from improper trading conduct."