The Chicago Board Options Exchange has agreed to pay a $6 million fine relating to what regulators call "various systematic breakdowns" in the policing of its own procedures.
The Securities and Exchange Commission announced the charge Tuesday and accused CBOE of "a failure to enforce or even fully comprehend rules to prevent abusive short selling."
In addition to the $6 million fine, the SEC said CBOE will implement major remedial measures to settle the charges. The fine is the first levied against an exchange for violations related to its own regulatory oversight.
The SEC said its investigation found that CBOE failed to adequately regulate and control a conflict for one of its member firms, Chicago-based optionsXpress. The SEC later charged that firm in a so-called naked short-selling scheme, or illegally selling shares it did not own.
The SEC claims CBOE didn't properly investigate the firm's compliance and interfered with the SEC's inquiry.
"CBOE demonstrated an overall inability to enforce (its own procedures) with an ineffective surveillance program that failed to detect wrongdoing despite numerous red flags," the SEC said.
CBOE fined $6 million in naked short selling scheme - chicagotribune.com
