Accusing the firm for not taking optimum steps to prevent short selling, the market regulator said that CBOE placed the interests of the firm ahead of its regulatory duties by failing to properly investigate the firm’s compliance with Regulation SHO (Reg. SHO).
The company transferred its surveillance and monitoring of Reg. SHO compliance from one department to another during 2008, and the replacement of responsibilities adversely affected its Reg. SHO enforcement program.
Subsequently, the firm failed to monitor the wrongdoing of any firm despite detection and complaints.
SEC enforcement division market abuse unit chief Daniel M Hawke said that the public rely on SROs to provide a watchful eye on their exchanges and market activities occurring through them.
"They must have strong compliance cultures and adequate and dedicated compliance resources to ensure that they do not stray from their bedrock obligation to provide rigorous self-regulation," Hawke added.
The market watchdog said that CBOE and affiliate C2 Options Exchange also failed to file proposed rule changes with the SEC when certain trading functions on their exchanges were implemented.
In order to settle the SEC’s charges, CBOE has agreed to reimburse a $6m penalty and implement major remedial measures to meet all relevant regulations and avoid future violations.
