By Whitney Kisling on September 25, 2012
A New York-based brokerage allowed overseas clients to run a scheme aimed at distorting stock prices by rapidly canceling orders, according to the U.S. Securities and Exchange Commission.
Clients of Hold Brothers On-Line Investment Services were “repeatedly manipulating publicly traded stocks” by placing and erasing orders in an illegal strategy designed to trick others into buying or selling, the SEC said today in a release. Hold Brothers, its owners, and the foreign firms Trade Alpha Corporate Ltd. and Demonstrate LLC agreed to settle allegations that the New York broker failed to supervise customers and pay $4 million in total SEC fines.
The SEC complaint targeted practices that abused high-speed computer trading on American equity venues. As high-frequency activity has grown in recent years, the agency’s efforts to stop fraudulent practices such as “layering” or “spoofing” have extended to the automated trading tactics.
“Direct access firms like these are the gatekeeper to our markets,” Sang Lee, managing partner at research firm Aite Group LLC in Boston, said today in a phone interview. “That’s why the SEC is doing this. This is certainly the area that they need to focus on, and on a larger scale.”
Steve Hold
Along with Hold Brothers, the SEC charged its co-founder and president, Steve Hold, who created and partially owned Trade Alpha and Demonstrate, according to today’s release. Robert Vallone, a former chief compliance officer and chief financial officer, and William Tobias, another executive, were also charged and agreed to the penalties.
A phone call to the Hold Brothers main number and an e-mail to the general media address weren’t immediately returned.
More…
http://www.businessweek.com/news/2012-09-25/sec-says-new-york-broker-allowed-high-speed-stock-manipulation
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