The Federal regulators have fined the Chicago Board Options Exchange $6 million as it stated the staffs of the same have interfered with the 3-year investigation of the short selling at a member firm in a never seen before breakdown of the trading supervision. The settlement calls for immediate remedial actions, is probably the first ever that is being assessed by the Securities and Exchange Commission for violating rules in context with the regulatory oversight. Incidentally, only 4 days ago, an administrative law judge gave a ruling that OptionsXpress Inc., a member of the CBOE, has helped to complete sham transactions which were in violation with laws of the US securities, also termed as Regulation SHO. Incidentally, OptionsXpress is a unit of Charles Schwab Corp.
The Securities & Exchange Commission, also known as SEX, often takes actions against investors and traders. However, exchanges generally enjoy legal protections in their capacity of being self-regulated companies. In case of Chicago Board Options Exchange, the oversight suffered as it transferred the responsibility for Regulation SHO enforcement from one department of the same to another one 5 years ago. According to SEC, Chicago Board Options Exchange not only put the firm’s interest above the regulation, but it tried to interfere in the investigation procedure of SEC as well. The surveillance program of Chicago Board Options Exchange has been termed as ineffective by SEC as it wasn’t able to detect the wrongdoing despite many red flags being raised.
The CBOE shares went down by 0.2% and each share of the same is currently priced at $42.14. The stock has experienced a surge of 43% in 2013.
As far as the statement of SEC is concerned, it became pretty clear that the staff of CBOE didn’t have sound knowledge on the law. They were not able to find any violations and took misguided & unprecedented steps as well.
Only a couple of weeks ago, NASDAQ OMX Group agreed to pay a total sum of $10 million as it mishandled the initial public offering of Facebook in May, 2012. The spokeswoman of the Chicago Board Options Exchange, Gail Ostin declined to make any comment other than the official statement which stated that the settlement marks a big step in putting SEC matters behind and all the actions suggested by SEC will be implemented soon, if not already in action.