By Angela Chen
Goldman Sachs Group Inc. agreed to pay $7 million to settle
charges that it violated the market access rule by failing to
prevent a technical glitch that sent out thousands of erroneous
trades in August 2013, the Securities and Exchange Commission
said.
Goldman has neither admitted nor denied the findings, and a
representative from the bank wasn't immediately available for
comment.
According to the SEC, Goldman Sachs didn't have adequate
safeguards to prevent a software glitch from sending 16,000
mispriced options orders in less than an hour. This occurred
shortly after Goldman had implemented a new internal software
program that helps determine the prices at which the firm would buy
or sell options from clients.
That morning, a Goldman employee lifted several controls that
automatically shut off outgoing options after certain level, the
agency said.
An error then converted Goldman's into live ones all priced at
$1. This resulted in about 1.5 million options contracts executed
within minutes during pre-market trading.
The orders, placed for options on stocks and exchange-traded
funds with ticker symbols beginning with the letters I through K,
drove some prices sharply lower. Many were later canceled or
adjusted. The firm racked up tens of millions of dollars in
losses.
"Firms that have market access need to have proper controls in
place to prevent technological errors from impacting trading," said
Andrew Ceresney, who is director of the SEC's enforcement
division.
Write to Angela Chen at angela.chen@dowjones.com
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