Bank of America (BAC) shares were lower nearly 3% on Monday after the Securities and Exchange Commission said Merrill Lynch has agreed to pay a $12.5 million penalty for maintaining ineffective trading controls that failed to prevent erroneous orders from being sent to the markets and causing mini-flash crashes.
Separately, Bats BZX Exchange, (BATS) Bats BYX Exchange, Bats EDGX Exchange, the New York Stock Exchange (ICE), NYSE Arca, and The NASDAQ Stock Market (NDAQ) said they have collectively fined Merrill Lynch $3 million for violating the SEC’s market access rule and the exchanges’ respective supervision rules.
The regulator said that an 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,
“Mini-flash crashes, such as those caused by Merrill Lynch, can undermine investor confidence in the markets,” said Andrew Ceresney, director of the SEC Enforcement Division. “It is essential that broker-dealers with market access have reasonable controls to prevent erroneous orders that disrupt trading.”