NYSE Regulation today announced disciplinary actions against three firms.

Morgan Stanley & Co. Inc. allegedly violated NYSE rules by failing to provide for, maintain, and implement appropriate blocks and inhibitors within electronic trading systems to prevent erroneous orders from being routed to the NYSE floor; and failing to have adequate procedures for training, supervision and control of traders, which resulted in trader’s execution of erroneous order that caused significant disruption in numerous issues on the floor.

The incident involved an input error by a trader where he erroneously created a basket with a notional value of approximately US$10.8 billion instead of US$10.8 million. As a result, erroneous orders for approximately 677,427,600 shares were transmitted for execution. Approximately 81,455,744 shares, with a market value of US$875,344,997, were executed before the firm cancelled the order. For at least 15 minutes in certain NYSE listed stocks, this error caused significant market disruption in that specialists were unable to update message boards relating to certain of the listed stocks and were unable to effect other trades until the accuracy of the erroneous orders could be verified.

The firm consented to censure, a US$300,000 fine, and undertaking to perform a review, without admitting or denying guilt.

The NYSE also sanctioned Merrill Lynch, Pierce, Fenner & Smith Inc. for failing to reasonably supervise and implement adequate controls regarding recordkeeping requirements for proprietary trades.

It consented, without admitting or denying guilt to findings of supervisory and control violations, to a penalty of a censure and a US$175,000 fine.

Finally, Calyon Securities (USA) Inc., consented without admitting or denying guilt to findings of trading and supervisory violations. The NYSE imposed a penalty of a censure and a US$90,000 fine.