Goldman to Pay $7 Million Over Options Glitch

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.

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