eBX Fined for Information Leakage

According to the charges from the SEC, eBX allowed a third-party vendor to utilize information on unexecuted trades on LeveL, its alternative trading system (ATS), in the vendor's own order routing service, thereby gaining a competitive advantage over other users. The charges allege that eBX did not have sufficient safeguards to protect this information.

Dark pools such as LeveL allow for non-displayed quotations, retaining confidentiality for participants and allowing for trading opportunities that may not exist on public, or 'lit', exchanges. In settling the charges, eBX will pay a $800,000 penalty and accept censure, along with preventing further violations.

"Dark pools are dark for a reason; buyers and sellers expect confidentiality of their trading information," says Robert Khuzami, director of the division of enforcement at the SEC. "Many eBX subscribers didn't get the benefit of that bargain, they were unaware that another order routing system was given exclusive access to trading information that it used for its own benefit."