The New York Stock Exchange LLC (NYSE) is paying US$9 million in a settlement with the U.S. Securities and Exchange Commission (SEC) stemming from a market outage in January 2023.
The SEC filed a settled enforcement proceeding against the NYSE, alleging that it breached exchange rules by failing to ensure that its systems that handle the market open were operating properly.
Specifically, back on Jan. 24, 2023, a disruption in the exchange’s critical systems resulted in the opening auctions for over 2,800 listed companies failing to happen that day — instead, the exchange opened continuous trading in those securities.
“NYSE’s failures caused market-wide impacts, including price-triggered restrictions on trading, market-wide trading pauses in 84 of the securities and ultimately thousands of busted trades,” the SEC’s order noted.
The failure followed hardware maintenance that occurred the previous evening. During the planned maintenance, the NYSE activated its backup trading system, but failed to shut it back down once the maintenance was complete. As a result, when the market opened the next day, the primary and backup systems were running simultaneously, which disrupted the opening auctions.
The SEC alleged that the NYSE didn’t have policies and procedures for monitoring whether its critical systems that directly supported its opening auctions had in fact run the required processes — and that the exchange, “failed to follow one of its own rules when it failed to conduct opening auctions.”
Under the settlement, the exchange agreed to pay US$9 million, and to cease and desist from further violations.
In accepting the settlement, the SEC noted that the exchange took remedial action to prevent a recurrence of the market failure — including the implementation of opening auction monitoring capabilities for all listed securities, modified its maintenance procedures and reprogrammed opening functionality.