Announced today: http://www.sec.gov/news/pressrelease/2015-164.html "ITG agreed to admit wrongdoing and pay disgorgement of $2,081,034 (the total proprietary revenues generated by Project Omega) plus prejudgment interest of $256,532 and a penalty of $18 million that is the SEC’s largest to date against an alternative trading system. “ITG created a secret trading desk and misused highly confidential customer order and trading information for its own benefit,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement. “In doing so, ITG abused the trust of its customers and engaged in conduct justifying the significant sanctions imposed in this case.” According to the SEC’s order instituting a settled administrative proceeding: Project Omega traded a total of approximately 1.3 billion shares, including approximately 262 million shares with unsuspecting subscribers in ITG’s own dark pool. Project Omega employed an algorithmic trading strategy called the “Facilitation Strategy” in which it executed trades based on a live feed of information concerning orders that its sell-side subscribers sent to ITG’s algorithms for handling. Project Omega accessed the feed by connecting to a software utility that was used by ITG’s sales and support teams. As a result, Project Omega had a real-time view of subscriber orders being placed through ITG’s algorithms. From April to December 2010, the Facilitation Strategy was designed to detect open orders of sell-side subscribers being handled by ITG. Based on that information, Project Omega opened positions in displayed markets on the same side of the market as the detected orders, and then closed these positions in POSIT by trading against the detected orders. By employing this strategy, Project Omega sought to capture the full “bid-ask spread” between the National Best Bid and Offer (NBBO). Project Omega had access to the identities of POSIT subscribers and used this information to identify sell-side subscribers and trade with them in the dark pool in connection with the Facilitation Strategy. To earn the full “bid-ask spread” in connection with the Facilitation Strategy, Project Omega needed the subscribers with which it traded in POSIT to be configured to trade “aggressively” so that the subscribers would “cross the spread” to trade with Project Omega. Project Omega took steps to ensure that the sell-side subscribers were configured to trade aggressively in POSIT. Project Omega’s other primary strategy called the “Heatmap Strategy” involved trading on markets other than POSIT based on a live feed of confidential information relating to customer executions in other dark pools. Based on customer executions, Project Omega’s Heatmap algorithm was designed to open positions in specific securities in displayed markets at the bid or the offer and then close them at midpoint or better in the external dark pools where customers had received midpoint executions. The goal of this strategy was to earn a “half spread” or better based on knowledge of ITG customers’ executions."
Are any of those fees split among the account holders affected, or does it all just roll back to the SEC?
I think that it all goes to the SEC. However, if there's a whistleblower involved, then they would collect up to 30%.
HAHAHA, good one. Yes, the SEC is supposed to try to identify the harmed parties and return the funds, but sometimes it's just too hard, ya'know? Then they have to keep it.
To be fair, they do give money back to people in cases where it's really obvious, like Ponzi schemes they bust. But if some guy trades options with inside info and gets caught and his assets seized, they don't ever go back to the market makers who got clobbered that day and make them whole.
Yes, they do. There was another settlement announced this morning--$20 million to be paid by Edward Jones. The fine includes restitution to be paid, with interest, to clients who overpaid for muni bonds. http://www.sec.gov/news/pressrelease/2015-166.html "Edward Jones agreed to settle the case by paying more than $20 million, which includes nearly $5.2 million in disgorgement and prejudgment interest that will be distributed to current and former customers who were overcharged for the bonds."