High-frequency trading firm hit with $5M penalty

October 01 00:02 2015

High-frequency trading firm Latour Trading LLC was hit with a $5 million civil penalty by the Securities and Exchange Commission Wednesday for violating trading rules designed to ensure safe and efficient financial markets. The SEC also ordered Latour, a broker-dealer owned by prominent high-frequency trading parent firm Tower Research Capital Investments, to repay more than $3 million in trading profits, rebates received by financial exchanges and prejudgment interest.

Latour consented to an order settling the SEC administrative proceeding without admitting or denying the allegations. The company said it corrected the trading issues by August 2014. “The firm is pleased to put this matter behind us. We take our regulatory obligations seriously and are committed to complying with all rules and regulations applicable to our businesses,” Latour said in a formal statement issued Wednesday.

The case marks the SEC’s second enforcement action against the firm. The financial market regulator last year accused Latour of violating rules requiring it to maintain a minimum level of net capital. The regulation is designed to prevent trading firms from taking excess risk. Latour agreed to pay a record $16 million settlement  of that case.

The new enforcement action also placed renewed focus on high-frequency trading, a common technique that features large volumes of transactions directed by algorithmic strategies and executed by high-speed computers. The practice has come under increased government scrutiny since last year’s publication of Flash Boys, a book in which author Michael Lewis contended that financial markets are rigged.