August 12, 2015

Broker Investment Technology Group, Inc. (ITG) and affiliate AlterNet Securities have admitted wrongdoing and agreed to pay $20.3 million to settle SEC charges that they operated a secret trading desk and misused the confidential trading information of dark pool subscribers.  The SEC found that despite claiming to be an “agency-only” broker whose interests wouldn’t conflict with its customers, ITG operated an undisclosed proprietary trading desk known as “Project Omega” for more than a year.  While ITG claimed to protect the confidentiality of its dark pool subscribers’ trading information, Project Omega accessed live feeds of order and execution information of its subscribers and used the information to implement high-frequency algorithmic trading strategies, including one in which it traded against subscribers in POSIT, ITG’s dark pool.  The $20.3 million payment includes an $18 million penalty – the largest to date imposed by the SEC against an alternative trading system.  SEC

Tagged in: Dark Pools, Market Manipulation and Trading Violations, Securities Fraud,