CBOE Responds to SEC Inquiry

Discussion in 'Wall St. News' started by Options12, Mar 3, 2012.

  1. Options12

    Options12 Guest

    "The SEC is investigating CBOE’s compliance with its obligations as a self-regulatory organization under the federal securities laws,” CBOE said in the filing. “The company is cooperating with the investigation, which is ongoing, and is conducting its own review of its compliance.”

    CBOE’s statement could refer to anything from technology glitches to monitoring trading and overseeing its member firms, James Angel, a finance professor at Georgetown University’s business school in Washington, said in a phone interview. It could also relate to “dodgy” activity by a floor trader or how well the exchange monitors trading on its electronic platform, he said.

    “It could mean almost anything,” Angel said. “Something at the CBOE has caught the SEC’s attention.

  2. I don't know if the SEC should be loved or hated by traders

    Loved for sitting on its hands in everything

    Hated for sitting on its hands in everything
  3. All option exchanges got away with big violations against the "RAES Bandits"(RB's). (Stock exchange violations to the "SOES Bandits, on a closely related issue, conversely resulted in a *billion* dollars in fines).

    RB's got raped because they dared to perform arbitrage between the option exchanges - a thing that is called healthy and is encouraged everywhere else. (And the option exchanges had already had anti-trust issues with competition between themselves!)

    I had friends at the option exchanges. The RB's got stuck with this treatment because the SEC didn't want to stand up for the public in this instance - the public, here, was trying to make money on the option exchanges.

    Then, the lawsuit against the option specialists for these violations got a dim-witted Judge. She couldn't figure out the competitive nature of this business, or the malevolent attitude of the exchanges!
    This was Judge Bucklo (Buckler?) in Chicago.

    CBOE has got to gloss over Compliance issues as quickly as possible.
  4. Options12

    Options12 Guest

    From: http://online.wsj.com/article/SB10001424052970204603004577269744005990690.html

    Updated March 8, 2012, 5:34 p.m. ET


    CHICAGO—The largest U.S. options exchange has put its most senior compliance officer on leave in the wake of an investigation by U.S. market regulators into the company's oversight of traders, according to people familiar with the matter.

    CBOE Holdings Inc. disclosed last week that the Securities and Exchange Commission was investigating whether the company properly supervised the activity of firms and traders registered under the exchange's function as a self-regulatory organization. CBOE runs the Chicago Board Options Exchange as well as other options-, stock- and futures-trading platforms.

    Patrick Fay, senior vice president of member and regulatory services for CBOE and a 24-year veteran of the exchange, has been placed on administrative leave in a move linked to the SEC probe, according to two people familiar with the situation.

    The SEC investigation, which these people said began in November, comes as U.S. market regulators more closely scrutinize exchanges' oversight functions following the collapse of MF Global Holdings Ltd.

    The Oct. 31 bankruptcy of broker-dealer MF Global raised questions around oversight from its exchange supervisors. CME Group Inc. monitored MF Global's futures-trading business, the bulk of its operations, while CBOE was its designated examining authority enforcing securities-market regulations.

    CBOE separately has launched its own internal investigation into compliance matters, according to its annual report filed with regulators last week.

    Neither the exchange operator nor Mr. Fay has been accused of wrongdoing. Representatives for CBOE and the SEC declined to comment. Mr. Fay wasn't immediately available for comment. It wasn't clear when he was placed on leave.

    CBOE serves as the designated examining authority for about 160 broker-dealers, which do business on CBOE's markets and other exchanges. The role involves CBOE officials enforcing federal rules governing capitalization, collateral and accounting laid out by federal regulators and includes monthly financial checks as well as the inspection of firms' offices.

    Mr. Fay is one of CBOE's 10 executive officers and has led its regulatory division since 2006, also supervising membership and market quality assurance. Previously, Mr. Fay worked on trading operations and marketing for the exchange.

    Since January, CBOE has moved to strengthen its oversight team, seeking to hire a chief compliance officer, a deputy chief regulatory officer and other supervisory staff.

    Financial firms that do business with the public, such as brokerages, are required to register with the Financial Industry Regulatory Authority, or Finra, the securities industry's main self-funded supervisory body. Firms that don't have public customers, such as proprietary trading houses or floor traders, can choose to register under exchanges where they do business.

    Over the past decade, market supervision and examination of firms have consolidated under Finra, which now oversees trading on markets run by Nasdaq OMX Group Inc. , NYSE Euronext and Direct Edge Holdings LLC. CBOE, which originated modern options trading in 1973, has led supervision of options traders and remains the biggest exchange regulator of such firms.

    Lawmakers have questioned the role of exchanges supervising their own customers after the collapse of MF Global. In December, Rep. Barney Frank (D., Mass.) called on CME, which oversees the biggest U.S. futures-trading firms, to spin off its regulatory arm into a separate entity to eliminate potential conflicts of interest.

    Regulators recently have pursued a number of probes into exchange functions. In February, Kansas exchange company BATS Global Markets Inc. disclosed a separate SEC probe focused on ties between stock exchanges and some electronic-trading firms. Last fall, the agency sanctioned Direct Edge, a New Jersey stock-exchange operator, for rule violations and system errors.

    CBOE runs the busiest U.S. market for trading options on securities and stock indexes, home to 27.7% of all options traded in February, according to options clearinghouse OCC. CBOE Holdings also runs a smaller venue for automated options trading as well as a futures market, and is the biggest owner of the CBOE Stock Exchange.
  5. Options12

    Options12 Guest

  6. Publicus


    Culture of corruption at the CBOE.

    Self-Regulatory Organizations don't work very well when even the top regulator (the SEC) has been captured by the industry.

    Google Mary Schapiro. The SEC's head, for goodness sakes, has conflicts that put millions of dollars into her own account.