MS Morgan Stanley

Merrill Lynch has agreed to pay a $12.5 million fine for maintaining ineffective trading controls that led to at least 15 mini-flash crashes between late 2012 and mid-2014.

The Securities and Exchange Commission said its investigation found the internal controls set to prevent erroneous trading orders at Merrill Lynch, the brokerage unit of Bank of America Corp., were set at levels so high that it rendered them ineffective.

A representative from Merrill Lynch couldn't be reached for comment.

The erroneous orders that passed through Merrill Lynch's internal controls caused certain stock prices to skid and then suddenly recover within seconds, the SEC said. For example, Merrill Lynch applied a limit of 5 million shares per order for one stock that traded about 79,000 shares a day, according to the SEC. Another order led to a nearly 3% decline in Google's stock in less than a second in April 2013.

Robert Cohen, co-chief of the SEC Enforcement Division's Market Abuse Unit, said the penalty was the highest-ever SEC fine for violations of the Market Access Rule. Other previous cases include a $4 million penalty paid by Morgan Stanley in 2014 and a $12 million penalty paid by Knight Capital in 2013.

Write to Joshua Jamerson at joshua.jamerson@wsj.com

(END) Dow Jones Newswires

September 26, 2016 12:35 ET (16:35 GMT)

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