SEC Issues Report of Investigation Regarding NASDAQ, as Overseen by Its Parent, NASD, Arising Out of Investigation of Suspicious Trading Activity and Net Capital Violations By MarketXT
FOR IMMEDIATE RELEASE
Washington, D.C., Feb. 9, 2005 Today, the Commission issued a Report of Investigation concerning Nasdaq, as overseen by its parent, the NASD, in connection with an investigation and inspection of wash trades and net capital violations by MarketXT, an NASD member firm. A copy of the Report is available at http://www.sec.gov/litigation/investreport/34-51163.htm. The Report finds, among other things, that Nasdaq employees observed suspicious trading by MarketXT and did not communicate their observations to NASD Regulation, Inc.
Stephen M. Cutler, Director of the Division of Enforcement, noted: “The Commission will not permit the regulatory responsibilities of exchanges and other markets to fall victim to increased competition or other business pressures.”
Mark Schonfeld, Director of the Northeast Regional Office, stated “Self-Regulatory Organizations are a critical line of defense for investors. Even if an SRO’s market and regulatory functions are delegated to separate entities, the SRO must ensure that each entity fulfills its regulatory responsibilities.”
In response to the Commission’s investigation and the inspection from which it stemmed, NASD and Nasdaq have implemented a number of remedial steps, all designed to strengthen the self-regulatory oversight of their market. NASD and Nasdaq have consented to the issuance of the report, but neither admit nor deny the findings or conclusions therein.
In a separate administrative proceeding, the Division of Enforcement charged MarketXT and its Chief Technology Officer, Irfan Amanat, with securities fraud for executing the wash trades and matched orders in order to capture market-data rebates from Nasdaq and charged MarketXT with operating without adequate net capital.
For further information contact:
Mark K. Schonfeld, Regional Director,
SEC Northeast Regional Office (646) 428-1650
Helene T. Glotzer,
Associate Regional Director (646) 428-1736
Additional materials: Administrative Proceeding Release No. 33-8533