BofA Fined $12.5 Million For Creating At Least 15 Mini “Flash Crashes”
by Tyler Durden
ZeroHedge.com
Sep 26, 2016
One of our recurring activities over the past few years was, in collaboration with Nanex, to point out the countless mini-flash crashes that take place almost on a daily basis across the equity market. Although not as dramatic as the far more popular major flash crashes of May 2010 or August 2015, these recurring events merely served to underscore just how broken and fragment the market plagued by HFTs has become.
And while the HFT lobby was quick to point out that mini flash crashes do not really take place and it is all just a fabrication by the “anti-HFT crusaders”, moments ago the SEC validated our previous observations, when it announced that Merrill Lynch has agreed to pay a $12.5 million penalty for unleashing at least 15 mini flash crashes between 2012 and 2014, as a result of maintaining “ineffective trading controls that failed to prevent erroneous orders from being sent to the markets.”
An SEC investigation found that Merrill Lynch caused market disruptions on at least 15 occasions from late 2012 to mid-2014 and violated the Market Access Rule because its internal controls in place to prevent erroneous trading orders were set at levels so high that it rendered them ineffective. For example, Merrill Lynch applied a limit of 5 million shares per order for one stock that only traded around 79,000 shares per day. Other trading strategies had limits set as high as 25 million shares, which Merrill Lynch reduced to 50,000 shares after the SEC’s investigation began.
The Rest…HERE
