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NYSE to pay $14M to settle SEC probes over 2015 trading halt, flash crash

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NYSE to pay $14M to settle SEC probes over 2015 trading halt, flash crash

The New York Stock Exchange and two affiliated exchanges have agreed to pay a $14 million penalty to settle a case related to several rule violations during periods of market volatility.

The violations included "erroneously" implementing a marketwide regulatory halt in July 2015, "negligently" misrepresenting stock prices as automated and applying price collars during extreme market volatility Aug. 24, 2015, which the Securities and Exchange Commission said resulted in order imbalances being resolved more slowly.

The SEC's charges came from five separate investigations and include the first-ever charged violation of Regulation Systems Compliance Integrity, the technology standards adopted in November 2014 that apply to self-regulatory organizations among other financial institutions.

U.S. equity markets on that day in August 2015 saw wild swings following global uncertainty hanging over the Chinese and global economies. The rapid selloff was deemed a flash crash akin to the one that occurred in May 2010. The flash crash revealed how the limit up-limit down rules that briefly halt a security from trading if it becomes too volatile, a mechanism meant to reduce volatility, actually made matters worse.

In January 2016, NYSE outlined actions to enhance U.S. equity market structure and strengthen the markets during such times of extreme volatility, including increasing the transparency of pre-opening indications and eliminating stop orders.

A NYSE spokesperson said the settlement is in the exchanges' best interest.

"We take our regulatory obligations seriously and remain focused on building and maintaining industry-leading technology and ensuring that our markets operate with the utmost integrity," the spokesperson said in an emailed statement.

NYSE is owned by Intercontinental Exchange Inc.