Traders Magazine Online News, October 5, 2015 John D'Antona Jr. No matter how fast a trader you are, sometimes it is simply impossible to outrun the long arm of the law. Just ask high-frequency trading firm Latour Trading, which has opted to settle charges that it violated market structure rules brought by the Securities and Exchange Commission. As a result of setting these allegations, the HFT firm has agreed to pay approximately $8 million dollars. Latour agreed to a settlement in which it will pay a $5 million civil penalty and more than $3 million of disgorgement of gross trading profits, rebates paid to it by exchanges, and prejudgment interest. An SEC investigation found that Latour violated the SEC rules - the Market Access Rule and Regulation National Market System - over a nearly four-year period in which Latour sent millions of non-compliant orders to U.S. exchanges. According to the order: Latour shared portions of its electronic trading infrastructure with its parent company, Tower Research. Some Tower Research employees could change the computer code without Latour's knowledge or approval. Latour's procedures to prevent such changes from having unintended effects on Latour's trading proved inadequate. In June 2011, Tower Research made a coding change that introduced an error into the shared infrastructure and, as a result, Latour sent millions of orders to exchanges that did not comply with the requirements of Regulation NMS. Some of these orders were executed, which led to Latour receiving gross trading profits and also rebates paid by stock exchanges. Latour lacked "direct and exclusive control" over its financial and regulatory risk management controls as required by the SEC's Market Access Rule and did not have adequate post-trade surveillance tools to detect its non-compliant trades. After learning of the error, Latour corrected many of the issues by October 2012 and addressed the rest by August 2014. "Automated trading systems can pose significant risks to the market and must be designed and implemented correctly," said Andrew Ceresney, Director of the SEC's Enforcement Division. "Firms that do not have control over their trading systems can undermine the integrity of our markets by sending millions of orders that violate SEC and stock exchange rules that promote fair and orderly trading, like Latour did in this case." According to the SEC's order, from October 2010 through August 2014, Latour sent approximately 12.6 million orders for more than 4.6 billion shares that did not comply with the requirements of Regulation NMS. The orders at issue were intermarket sweep orders (ISOs), which trading centers may immediately execute at prices that might otherwise appear to violate Rule 611 of Regulation NMS. http://www.tradersmagazine.com/news...r&utm_campaign=regulation-oct 9 2015&st=email