Brokerage firms, including S.G. Cowen, might have placed false trades to affect the Volume Weighted Average Price (VWAP), on which the traders' compensation is based, a source told the Post.
In addition, a source at the SEC said the Commission is looking into whether renegade Fidelity traders asked brokerages to erase unprofitable trades from their books by having the brokerages absorb the losses through error accounts, instead.
"There's some indication of impropriety in error accounts," although the extent is yet unknown, the SEC source said.
This is the latest wrinkle on an ongoing investigation into whether brokerage firms sent lavish gifts to Fidelity traders to encourage them to send them their massive trading volume. While the VWAP adjustments and error accounts would have proven costly for the brokerage firms, they would have been willing to absorb the losses in exchange for Fidelity's lucrative business.
Fidelity has previously said it will defend itself.