The US market regulator has launched a broad investigation into whether exchanges favour large trading companies at the expense of smaller customers.
The enforcement inquiries emerged from examinations by the Securities and Exchange Commission of how exchange operators, some of which also regulate their customers, manage conflicts of interest with hedge funds, high-frequency trading groups, banks and asset managers. The regulatory concerns were heightened by the collapse of futures broker MF Global and its missing customer funds, which put a spotlight on the role of exchange operator CME Group.
According to people familiar with the probe, SEC officials are focusing on whether operators use multiple exchanges to appease customers which provide large order flows. This would allow them to grant advantages to some customers by using different rules on different exchanges, without violating rules barring discrimination on any one exchange.
All major US exchanges operate multiple markets. They are often the legacy of acquisitions and use different pricing schemes or trading systems.