SEC Charges Dark Pool Operator eBX LLC With Failing To Protect Confidential Information

In the Matter of eBX, LLC, Admin. Proc. No. 3-15058.  On October 3, 2012, the SEC announced it issued a settled order instituting administrative proceedings and imposing remedial sanctions against eBX, LLC.  eBX is a registered broker-dealer.  It operates an alternative trading system (“ATS”) called LeveL.  LeveL is subject to Regulation ATS under the Exchange Act.  eBX marketed LeveL as a “dark pool” which means it does not display quotations to the public.  As a result, subscribers become aware of trading opportunities that are not available to the general public.  Regulation ATS requires than an ATS have safeguards to protect subscribers’ confidential trading information.  LeveL, however, failed to protect the confidential trading information of its subscribers.  Instead, it permitted an outside technology firm to use the information about customers’ unexecuted orders for its own business advantage.  The outside technology firm used the knowledge of the unexecuted orders to make decisions for its own customers.  Without admitting or denying the charges, eBX consented to an order requiring it to cease and desist from committing or causing future violations of Rules 301(b)(2) and 301(b)(10) of Regulation ATS.  eBX was also censured and agreed to pay a civil monetary penalty of $800,000.

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