HAP Trading, chief fined $1.5 mln for options manipulation

CHICAGO, May 12 (Reuters) - Financial exchanges run by CBOE Holdings Inc, NASDAQ OMX Group Inc and IntercontinentalExchange Group Inc on Monday said they fined a trading firm and its chief $1.5 million for manipulating options markets.

In addition, a trader was fined $250,000.

New York-based HAP Trading LLC and Chief Executive Harsh Padia were ordered to give up $1.25 million in profits and pay $250,000 in penalties for manipulation and for failing to properly supervise an employee, according to a statement from the exchanges.

Proprietary trader Saagar Gupta engaged in "cross-product manipulation" on behalf of HAP Trading on multiple dates from May to July 2010, the statement said. He was suspended from trading for three months and fined $250,000 by the Chicago Board Options Exchange, owned by CBOE, NASDAQ OMX PHLX, and by NYSE MKT and NYSE Arca, which are owned by ICE.

HAP Trading could not be reached for comment.

CBOE and NASDAQ had previously disciplined HAP Trading for other violations, according to the Financial Industry Regulatory Authority. The firm is no longer registered with FINRA, according to the regulator's website.

CBOE, which was fined $6 million last year for failing to police its own marketplace properly, this year unveiled tighter rules for traders to help prevent fraud. The New York Stock Exchange this month agreed to pay $4.5 million to settle charges brought by U.S. securities regulators that the exchange flouted its own rules.

(Reporting by Tom Polansek; Editing by Dan Grebler)