BrokerCheck Report VIRTU FINANCIAL BD LLC Section Title Report Summary Registration and Withdrawal Firm History CRD# 148390 1 2 8 Firm Profile 3 - 7 Page(s) Firm Operations 9 - 21 Disclosure Events 22 Please be aware that fraudsters may link to BrokerCheck from phishing and similar scam websites, trying to steal your personal information or your money. Make sure you know who you’re dealing with when investing, and contact FINRA with any concerns. For more information read our investor alert on imposters. i
Transcript
BrokerCheck Report
VIRTU FINANCIAL BD LLC
Section Title
Report Summary
Registration and Withdrawal
Firm History
CRD# 148390
1
2
8
Firm Profile 3 - 7
Page(s)
Firm Operations 9 - 21
Disclosure Events 22
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For more information read our investor alert on imposters.
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This report summary provides an overview of the brokerage firm. Additional information for this firm can be foundin the detailed report.
Disclosure Events
Brokerage firms are required to disclose certaincriminal matters, regulatory actions, civil judicialproceedings and financial matters in which the firm orone of its control affiliates has been involved.
Are there events disclosed about this firm? Yes
The following types of disclosures have beenreported:
Type Count
Regulatory Event 17
Firm Profile
This firm is classified as a limited liability company.
This firm was formed in Delaware on 05/02/2008.
Its fiscal year ends in December.
Firm History
Information relating to the brokerage firm's historysuch as other business names and successions(e.g., mergers, acquisitions) can be found in thedetailed report.
Firm Operations
This brokerage firm is no longer registered withFINRA or a national securities exchange.
This section provides information relating to the date the brokerage firm ceased doing business and the firm's financialobligations to customers or other brokerage firms.
Registration Withdrawal Information
12/31/2019
No
This firm terminated orwithdrew registration on:
Does this brokerage firm oweany money or securities toany customer or brokeragefirm?
This firm is classified as a limited liability company.
This firm was formed in Delaware on 05/02/2008.
CRD#
This section provides the brokerage firm's full legal name, "Doing Business As" name, business and mailingaddresses, telephone number, and any alternate name by which the firm conducts business and where such name isused.
RegistrationsThis section provides information about the regulators (Securities and Exchange Commission (SEC), self-regulatoryorganizations (SROs), and U.S. states and territories) with which the brokerage firm is currently registered andlicensed, the date the license became effective, and certain information about the firm's SEC registration.
The firm's registration was from 10/20/2008 to 04/09/2020.
Types of BusinessThis section provides the types of business, including non-securities business, the brokerage firm is engaged in orexpects to be engaged in.
Other Types of Business
This firm does effect transactions in commodities, commodity futures, or commodity options.This firm does not engage in other non-securities business.
Non-Securities Business Description:
This firm currently conducts 4 types of businesses.
Types of Business
U S. government securities dealer
Put and call broker or dealer or option writer
Trading securities for own account
Other - THE FIRM WILL TRADE THE FOLLOWING FOR ITS PROPRIETY ACCOUNT: EQUITIES, FINANCIALINDEX FUTURES, FINANCIAL FUTURES AND OPTIONS, FORWARDS AND EQUITY OPTIONS.
Description: INDIVIDUAL PROVIDED FUNDING THROUGH THE FAMILY TRUSTS,WHICH THEN PROVIDED FUNDING FOR THE BD PARENT COMPANY ANDTHE BD PARENT PROVIDES FUNDING TO THE BD.
Organization AffiliatesThis section provides information on control relationships the firm has with other firms in the securities, investmentadvisory, or banking business.
This firm is, directly or indirectly:
· in control of· controlled by· or under common control withthe following partnerships, corporations, or other organizations engaged in the securities or investmentadvisory business.
No
Yes
AUSTRALIA
Yes
03/01/2019
LEVEL 49, RIALTO SOUTH TOWER525 COLLINS ST.MELBOURNE 3000, AUSTRALIA
VIRTU ITG AUSTRALIA LIMITED is under common control with the firm.
VIRTU ITG AUSTRALIA LIMITED IS AN INDIRECT WHOLLY-OWNEDSUBSIDIARY OF THE APPLICANT'S PARENT ORGANIZATION, INVESTMENTTECHNOLOGY GROUP, INC.
Description:
Investment AdvisoryActivities:
Securities Activities:
Country:
Foreign Entity:
Effective Date:
Business Address:
No
Yes
CANADA
Yes
03/01/2019
THE EXCHANGE TOWER130 KING STREET WESTTORONTO, CANADA M5X 1B1
VIRTU ITG CANADA CORP is under common control with the firm.
VIRTU ITG CANADA CORP IS AN INDIRECT WHOLLY-OWNED SUBSIDIARYOF THE APPLICANT'S PARENT ORGANIZATION, INVESTMENT TECHNOLOGYGROUP, INC.
Organization Affiliates (continued)VIRTU ITG CANADA CORP IS AN INDIRECT WHOLLY-OWNED SUBSIDIARYOF THE APPLICANT'S PARENT ORGANIZATION, INVESTMENT TECHNOLOGYGROUP, INC.
No
Yes
IRELAND
Yes
03/01/2019
GEORGES QUAYFIRST FLOOR BLOCK ADUBLIN 2, IRELAND
INVESTMENT TECHNOLOGY GROUP LIMITED is under common control with the firm.
INVESTMENT TECHNOLOGY GROUP LIMITED IS AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF THE APPLICANT'S PARENT ORGANIZATION,INVESTMENT TECHNOLOGY GROUP, INC.
Description:
Investment AdvisoryActivities:
Securities Activities:
Country:
Foreign Entity:
Effective Date:
Business Address:
No
Yes
HONG KONG
Yes
03/01/2019
6/F CENTRAL TOWER28 QUEENS'S ROAD CENTRALHONG KONG, HONG KONG
VIRTU ITG HONG KONG LIMITED is under common control with the firm.
VIRTU ITG HONG KONG IS AN INDIRECT WHOLLY-OWNED SUBSIDIARY OFTHE APPLICANT'S PARENT ORGANIZATION, INVESTMENT TECHNOLOGYGROUP, INC.
Description:
Investment AdvisoryActivities:
Securities Activities:
Country:
Foreign Entity:
Effective Date:
Business Address:
Yes
03/01/2019
THE EXCHANGE TOWER130 KING STREET WEST SUITE 1050TORONTO, CANADA M5X1B1
TRIACT CANADA MARKETPLACE LP (ONTARIO) is under common control with the firm.
VIRTU FINANCIAL CAPITAL MARKETS IS UNDER COMMON CONTROL WITHVIRTU FINANCIAL BD LLC. BOTH FIRMS ARE SUBSIDIARIES OF VIRTUFINANCIAL, LLC.
Description:
Investment AdvisoryActivities:
Securities Activities:
Country:
Foreign Entity:
No
Yes
No
08/01/2009
300 VESEY STNEW YORK, NY 10282
VIRTU GLOBAL MARKETS, LLC is under common control with the firm.
VIRTU GLOBAL MARKETS, LLC IS AN AFFILIATE OF VIRTU FINANCIAL BD,LLC AND A WHOLLY-OWNED SUBSIDIARY OF VIRTU FINANCIAL, LLC. VIRTUGLOBAL MARKETS, LLC IS PRIMARILY ENGAGED IN FUTURES AND FXTRANSACTIONS BUT ENGAGES IN TRANSACTIONS IN TREASURYSECURITIES THROUGH A PRIMARY DEALER.
Description:
Investment AdvisoryActivities:
Securities Activities:
Country:
Foreign Entity:
Effective Date:
Business Address:
No
Yes
IRELAND
Yes
10/01/2009
HARCOURT ROADEUROPA BUSINESS CENTRE, SUITE 116DUBLIN 2, IRELAND
VIRTU FINANCIAL IRELAND LIMITED is under common control with the firm.
VIRTU FINANCIAL IRLEAND LIMITED IS AN AFFILIATE OF VIRUT FINANCIALBD, LLC AND A WHOLLY-OWNED SUBSIDIARY OF VIRTU FINANCIAL, LLC.VIRTU FINANCIAL IRLEAND RECENTLY RECEIVED APPROVAL TO CONDUCTSECURITIES ACTIVITY ON EXCHANGES IN EUROPE.
VIRTU FINANCIAL IRLEAND LIMITED IS AN AFFILIATE OF VIRUT FINANCIALBD, LLC AND A WHOLLY-OWNED SUBSIDIARY OF VIRTU FINANCIAL, LLC.VIRTU FINANCIAL IRLEAND RECENTLY RECEIVED APPROVAL TO CONDUCTSECURITIES ACTIVITY ON EXCHANGES IN EUROPE.
Description:
This firm is not directly or indirectly, controlled by the following:
· bank holding company· national bank· state member bank of the Federal Reserve System· state non-member bank· savings bank or association· credit union· or foreign bank
All firms registered to sell securities or provide investment advice are required to disclose regulatory actions, criminal orcivil judicial proceedings, and certain financial matters in which the firm or one of its control affiliates has been involved.For your convenience, below is a matrix of the number and status of disclosure events involving this brokerage firm orone of its control affiliates. Further information regarding these events can be found in the subsequent pages of thisreport.
What you should know about reported disclosure events:
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particular criminal event.3. Disclosure events in BrokerCheck reports come from different sources:
o Disclosure events for this brokerage firm were reported by the firm and/or regulators. When the firmand a regulator report information for the same event, both versions of the event will appear in theBrokerCheck report. The different versions will be separated by a solid line with the reporting sourcelabeled.
4. There are different statuses and dispositions for disclosure events: o A disclosure event may have a status of pending, on appeal, or final.
§ A "pending" event involves allegations that have not been proven or formally adjudicated.§ An event that is "on appeal" involves allegations that have been adjudicated but are currently
being appealed.§ A "final" event has been concluded and its resolution is not subject to change.
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or (2) an administrative panel in an action brought by a regulator that is contested by the partycharged with some alleged wrongdoing.
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§ A "resolved" matter usually involves no payment to the customer and no finding ofwrongdoing on the part of the individual broker. Such matters generally involve customerdisputes.
5. You may wish to contact the brokerage firm to obtain further information regarding any of thedisclosure events contained in this BrokerCheck report.
Regulatory - Final
This type of disclosure event involves (1) a final, formal proceeding initiated by a regulatory authority (e.g., a statesecurities agency, self-regulatory organization, federal regulator such as the U.S. Securities and Exchange Commission,foreign financial regulatory body) for a violation of investment-related rules or regulations; or (2) a revocation orsuspension of the authority of a brokerage firm or its control affiliate to act as an attorney, accountant or federalcontractor.
Disclosure 1 of 17
Reporting Source: Regulator
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDORDERS WITH DISCONTINUED ATIS FOR COMPARISON AND/ORSETTLEMENT. THE FIRM FAILED TO IMPLEMENT ADEQUATE SUPERVISORYSYSTEMS AND PROCEDURES REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH NYSE RULE 132 PERTAINING TO THE SUBMISSION OFATI CODES AND EXCHANGE RULE CHANGES AND REGULATORYGUIDANCE. THE FIRM'S WSPS DID NOT SET FORTH A REASONABLYDESIGNED SUPERVISORY SYSTEM FOR MONITORING REGULATORY RULECHANGES AND/OR GUIDANCE OR FOR IMPLEMENTING APPROPRIATESYSTEM CHANGES RESULTING THEREFROM.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT SUBMITTEDORDERS WITH DISCONTINUED ATIS FOR COMPARISON AND/ORSETTLEMENT. THE FIRM FAILED TO IMPLEMENT ADEQUATE SUPERVISORYSYSTEMS AND PROCEDURES REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH NYSE RULE 132 PERTAINING TO THE SUBMISSION OFATI CODES AND EXCHANGE RULE CHANGES AND REGULATORYGUIDANCE. THE FIRM'S WSPS DID NOT SET FORTH A REASONABLYDESIGNED SUPERVISORY SYSTEM FOR MONITORING REGULATORY RULECHANGES AND/OR GUIDANCE OR FOR IMPLEMENTING APPROPRIATESYSTEM CHANGES RESULTING THEREFROM.
Resolution Date: 03/03/2020
Resolution:
Other Sanctions Ordered: UNDERTAKING
Sanction Details: THE FIRM WAS CENSURED, FINED $70,000, AND REQUIRED TO REVISE ITSWRITTEN SUPERVISORY PROCEDURES TO ADDRESS THE DEFICIENCIESIDENTIFIED IN THE AWC.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, VIRTU FINANCIAL BDLLC ("VIRTU" OR THE "FIRM") CONSENTED TO THE SANCTIONS AND TOTHE ENTRY OF FINDINGS THAT IT FAILED TO HAVE A SURVEILLANCESYSTEM IN PLACE REASONABLY DESIGNED TO DETECT AND AID INPREVENTING CERTAIN POTENTIALLY VIOLATIVE SELF-TRADES IN THENYSE ARCA SINGLE-PRICE AUCTIONS.THE FINDINGS STATED THAT WASH TRADES AND UNINTENTIONAL SELF-TRADES EACH INVOLVE NO CHANGE IN BENEFICIAL OWNERSHIP AND CANHARM THE MARKET AND OTHER MARKET PARTICIPANTS BY, FOREXAMPLE, CREATING AN INACCURATE APPEARANCE OF TRADINGACTIVITY IN A SECURITY OR WITH RESPECT TO THE MARKET IN SUCHSECURITY. THUS, FIRMS SHOULD HAVE SUPERVISORY SYSTEMS IN PLACETHAT ARE REASONABLY DESIGNED TO DETECT AND AID IN PREVENTINGWASH AND SELF-TRADES. VIRTU WAS THE NYSE ARCA LEAD MARKETMAKER ("LMM") FOR BOTH SYMBOLS "ABC" AND "DEF," (NYSE REGULATIONHAS ANONYMIZED THE NAMES OF THE RELEVANT SECURITIES). ALL OFTHE TRADES IN SYMBOLS ABC AND DEF WERE ENTERED ON BEHALF OFTHE FIRM'S PROPRIETARY TRADING ACCOUNT AND WERE SENT USINGTHE SAME MARKET MAKING STRATEGY. VIRTU MARKED BOTH SIDES OFITS ORDERS IN SYMBOLS ABC AND DEF WITH SELF-TRADE PREVENTION("STP") AND ADD LIQUIDITY ONLY ("ALO") DESIGNATIONS, WHICHORDINARILY WOULD PREVENT VIRTU'S ORDERS ON BOTH SIDES OF THEMARKET FROM TRADING WITH EACH OTHER. HOWEVER, AS EXPLAINED INTHE NYSE ARCA RULES, ALO AND STP DESIGNATIONS DO NOT PREVENTORDERS FROM INTERACTING IN THE NYSE ARCA SINGLE-PRICEAUCTIONS. VIRTU DID NOT HAVE OTHER PRE-TRADE CONTROLS IN PLACETO PREVENT SELF-TRADES DURING THE NYSE ARCA SINGLE-PRICEAUCTIONS. AS A RESULT, DURING THE NYSE ARCA SINGLE-PRICEAUCTIONS, VIRTU ENGAGED IN SELF-TRADES IN SYMBOLS ABC AND DEF.VIRTU'S SELF-TRADING ACTIVITY IN SYMBOLS ABC AND DEFMEANINGFULLY IMPACTED THE AVERAGE DAILY TRADING VOLUME OFTHOSE SYMBOLS. MOREOVER, THE FIRM DID NOT MAINTAIN A POST-TRADE SURVEILLANCE, REASONABLY DESIGNED TO DETECT WASH ANDSELF-TRADES DURING THE NYSE ARCA SINGLE-PRICE AUCTIONS. TOSURVEIL FOR WASH AND SELF-TRADES ACROSS STRATEGIES ANDTRADING UNITS, THE FIRM HAD A DAILY POTENTIAL SELF MATCHDETECTION REPORT. HOWEVER, THE REPORT'S PARAMETERS WERE TOONARROW AND THUS FAILED TO DETECT SOME SELF-TRADES IN SYMBOLSABC AND DEF. FURTHERMORE, THE FIRM FAILED TO TAKE TIMELY ACTIONTO ADDRESS THE SELF-TRADES IN SYMBOLS ABC AND DEF THAT WEREIDENTIFIED BY ITS REPORTS.
Sanction Details: THE FIRM WAS CENSURED AND FINED $95,000.WITHIN 90 DAYS OF THE EXECUTION OF THIS AWC (OR SUCH OTHER TIMEAS MAY BE MUTUALLY AGREED TO WITH NYSE REGULATION STAFF), THEFIRM AGREES TO PROVIDE: (1) A CERTIFICATION THAT THE FIRM HASREVISED ITS SUPERVISORY SYSTEM CONTROLS AND REVIEWS TOADDRESS THE DEFICIENCIES DESCRIBED IN THE AWC; AND (2) THE DATETHE REVISED PROCEDURES WERE IMPLEMENTED.
Regulator Statement IN DETERMINING TO RESOLVE THIS MATTER ON THE BASIS SET FORTHHEREIN, ENFORCEMENT TOOK INTO CONSIDERATION THE FIRM'SREPRESENTATION THAT IT REVISED ITS PRE-TRADE CONTROLS TOPREVENT SELF-TRADES DURING THE NYSE ARCA SINGLE-PRICEAUCTIONS.
NYSE ARCA CASE NO. 2017-11-00124 (INCL. 2018-07-00069 & 2019-01-00043)
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT FROM TIME TO TIME, THE FIRM HADUNINTENTIONAL SELF TRADES IN TWO SYMBOLS DURING THE AUCTIONPERIOD.
Principal Product Type: Equity Listed (Common & Preferred Stock)
Other Product Type(s):
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT FROM TIME TO TIME, THE FIRM HADUNINTENTIONAL SELF TRADES IN TWO SYMBOLS DURING THE AUCTIONPERIOD.
Resolution Date: 07/10/2019
Resolution:
Other Sanctions Ordered:
Sanction Details: ON JULY 18, 2019, VIRTU FINANCIAL BD LLC PAID A FINE OF $95,000 TONYSE ARCA INC. ADDITIONALLY, THE FIRM HAS UPDATED ITSSUPERVISORY CONTROLS AND REVIEWS TO ADDRESS THE DEFICIENCIESIDENTIFIED BY STAFF.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, VIRTU FINANCIAL BDLLC (THE "FIRM") CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS THAT IN INSTANCES, THE FIRM FAILED TO MAINTAIN ACONTINUOUS TWO-SIDED TRADING INTEREST, DURING REGULAR MARKETHOURS, AT PRICES WITHIN CERTAIN PERCENTAGES AWAY FROM THENATIONAL BEST BID OR OFFER (NBBO). THE FINDINGS STATED THATTHESE CONDUCTS OCCURRED DUE TO BRIEF INTERRUPTIONS INNETWORK ACTIVITY OR THE FIRM BEING UNAWARE OF ITS REGISTRATIONIN FOUR SECURITY SYMBOLS, AND DUE TO A SYSTEM ISSUE THATCAUSED THE FIRM TO STOP QUOTING IN CERTAIN SECURITIESAPPROXIMATELY THREE SECONDS PRIOR TO MARKET CLOSE. DESPITECONDUCTING REAL-TIME SURVEILLANCE OF ITS QUOTING ACTIVITY, THEFIRM WOULD HAVE HAD GREAT DIFFICULTY IN IDENTIFYING THECONDUCT DUE TO A SYSTEM ISSUE GIVEN THE TIMING OF THE ACTIVITYRELATIVE TO MARKET CLOSE. AFTER THE DEPARTMENT OF MARKETREGULATION AT FINRA CONTACTED THE FIRM, IT RESOLVED THE SYSTEMISSUE.
WITHOUT ADMITTING OR DENYING THE FINDINGS, VIRTU FINANCIAL BDLLC (THE "FIRM") CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS THAT IN INSTANCES, THE FIRM FAILED TO MAINTAIN ACONTINUOUS TWO-SIDED TRADING INTEREST, DURING REGULAR MARKETHOURS, AT PRICES WITHIN CERTAIN PERCENTAGES AWAY FROM THENATIONAL BEST BID OR OFFER (NBBO). THE FINDINGS STATED THATTHESE CONDUCTS OCCURRED DUE TO BRIEF INTERRUPTIONS INNETWORK ACTIVITY OR THE FIRM BEING UNAWARE OF ITS REGISTRATIONIN FOUR SECURITY SYMBOLS, AND DUE TO A SYSTEM ISSUE THATCAUSED THE FIRM TO STOP QUOTING IN CERTAIN SECURITIESAPPROXIMATELY THREE SECONDS PRIOR TO MARKET CLOSE. DESPITECONDUCTING REAL-TIME SURVEILLANCE OF ITS QUOTING ACTIVITY, THEFIRM WOULD HAVE HAD GREAT DIFFICULTY IN IDENTIFYING THECONDUCT DUE TO A SYSTEM ISSUE GIVEN THE TIMING OF THE ACTIVITYRELATIVE TO MARKET CLOSE. AFTER THE DEPARTMENT OF MARKETREGULATION AT FINRA CONTACTED THE FIRM, IT RESOLVED THE SYSTEMISSUE.
Resolution Date: 07/08/2019
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM WAS CENSURED AND FINED $25,000.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Principal Product Type: Equity Listed (Common & Preferred Stock)
Other Product Type(s):
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT FROM TIME TO TIME, THE FIRM DID NOTMAINTAIN A CONTINUOUS TWO-SIDED TRADING INTEREST DURINGREGULAR MARKET HOURS AT PRICES WITHIN CERTAIN PERCENTAGESAWAY FROM THE NBBO.
Current Status: Final
Resolution Date: 07/08/2019
Resolution:
Other Sanctions Ordered:
Sanction Details: ON JULY 2, 2019, VIRTU FINANCIAL BD LLC PAID A FINE OF $25,000 TONASDAQ STOCK MARKET LLC.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTION AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH, MAINTAIN, AND ENFORCE ADEQUATE SUPERVISORYPROCEDURES, INCLUDING WRITTEN SUPERVISORY PROCEDURES, AND ASYSTEM OF FOLLOW-UP AND REVIEW TO IDENTIFY OPTIONS EXCESSIVEMESSAGING ACTIVITY, IN VIOLATION OF NYSE ARCA RULES 11.18(B) AND(C).
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTION AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH, MAINTAIN, AND ENFORCE ADEQUATE SUPERVISORYPROCEDURES, INCLUDING WRITTEN SUPERVISORY PROCEDURES, AND ASYSTEM OF FOLLOW-UP AND REVIEW TO IDENTIFY OPTIONS EXCESSIVEMESSAGING ACTIVITY, IN VIOLATION OF NYSE ARCA RULES 11.18(B) AND(C).
Resolution Date: 11/08/2018
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM WAS FINED $3,500.
Regulator Statement THE MATTER WAS RESOLVED AS A MINOR RULE VIOLATION.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
No
Sanctions Ordered: Monetary/Fine $3,500.00
Other
iReporting Source: Firm
Initiated By: NEW YORK STOCK EXCHANGE REGULATION
Date Initiated: 07/12/2018
Docket/Case Number: 2018-07-00044
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO A FINE IN ACCORDANCE WITH NYSE ARCA'S MINOR RULE PLANINDICATING THAT THE FIRM DID NOT ESTABLISH WRITTEN SUPERVISORYPROCEDURES THAT WOULD REASONABLY PREVENT EXCESSIVE ORDERSBY THE FIRM.
Sanction Details: VIRTU CONSENTED TO A $3,500 FINE.
Sanctions Ordered: Monetary/Fine $3,500.00
Acceptance, Waiver & Consent(AWC)
Disclosure 5 of 17
i
Reporting Source: Regulator
Allegations: VIRTU FINANCIAL BD, LLC ("VIRTU FINANCIAL")VIOLATED CHX ARTICLE 7,RULE 9 (SHORT POSITIONS), WHEN ON CERTAIN SETTLEMENT DATESFROM JULY 31, 2013 TO FEBRUARY 27, 2015, THE FIRM SUBMITTEDINACCURATE SHORT POSITION REPORTS, OR FAILED TO SUBMIT SHORTPOSITION REPORTS AS FOLLOWS: (1) BETWEEN JULY 31, 2013 ANDFEBRUARY 27, 2015, VIRTU FINANCIAL FILED 2,488 SHORT POSITIONREPORTS TOTALING 77,678,669 SHARES OF VARIOUS SECURITIES, WHENIT SHOULD HAVE REPORTED ONLY 1,314 SHORT POSITION REPORTSTOTALING 57,038,934 SHARES FOR CERTAIN SECURITIES; AND (2)BETWEEN JANUARY 15, 2014 AND FEBRUARY 27, 2015, VIRTU FINANCIALFAILED TO FILE 887 SHORT POSITIONS REPORTS INVOLVING 2,694,631SHARES. IN ADDITION, VIRTU FINANCIAL VIOLATED CHX ARTICLE 6, RULE5(B), PRIOR TO SEPTEMBER 24, 2013 AND CHX ARTICLE 6, RULE 5(A) ANDRULE 5(C) ON AND AFTER SEPTEMBER 24, 2013, WHEN FROM JULY 2013TO FEBRUARY 2015, VIRTU FINANCIAL FAILED TO: ESTABLISH ANDMAINTAIN WRITTEN SUPERVISORY PROCEDURES WHICH WEREREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RULES OF THEEXCHANGE; REASONABLY ENSURE THAT IT WAS SUBMITTING ACCURATESHORT POSITION REPORTS, IN COMPLIANCE WITH CHX ARTICLE 7, RULE9; REASONABLY ENSURE THAT THE COMPUTER-GENERATED REPORTSWHICH WERE SUBMITTED COMPLIED WITH ITS WRITTEN SUPERVISORYPROCEDURES; AND ADEQUATELY COMPARE ITS COMPUTER-GENERATEDREPORTS WITH ITS STOCK RECORD TO REASONABLY ENSURE ITSSYSTEM LOGIC WAS ACCURATELY PREPARING ITS SHORT POSITIONREPORTS.
Principal Product Type: Equity Listed (Common & Preferred Stock)
Other Product Type(s):
VIRTU FINANCIAL BD, LLC ("VIRTU FINANCIAL")VIOLATED CHX ARTICLE 7,RULE 9 (SHORT POSITIONS), WHEN ON CERTAIN SETTLEMENT DATESFROM JULY 31, 2013 TO FEBRUARY 27, 2015, THE FIRM SUBMITTEDINACCURATE SHORT POSITION REPORTS, OR FAILED TO SUBMIT SHORTPOSITION REPORTS AS FOLLOWS: (1) BETWEEN JULY 31, 2013 ANDFEBRUARY 27, 2015, VIRTU FINANCIAL FILED 2,488 SHORT POSITIONREPORTS TOTALING 77,678,669 SHARES OF VARIOUS SECURITIES, WHENIT SHOULD HAVE REPORTED ONLY 1,314 SHORT POSITION REPORTSTOTALING 57,038,934 SHARES FOR CERTAIN SECURITIES; AND (2)BETWEEN JANUARY 15, 2014 AND FEBRUARY 27, 2015, VIRTU FINANCIALFAILED TO FILE 887 SHORT POSITIONS REPORTS INVOLVING 2,694,631SHARES. IN ADDITION, VIRTU FINANCIAL VIOLATED CHX ARTICLE 6, RULE5(B), PRIOR TO SEPTEMBER 24, 2013 AND CHX ARTICLE 6, RULE 5(A) ANDRULE 5(C) ON AND AFTER SEPTEMBER 24, 2013, WHEN FROM JULY 2013TO FEBRUARY 2015, VIRTU FINANCIAL FAILED TO: ESTABLISH ANDMAINTAIN WRITTEN SUPERVISORY PROCEDURES WHICH WEREREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RULES OF THEEXCHANGE; REASONABLY ENSURE THAT IT WAS SUBMITTING ACCURATESHORT POSITION REPORTS, IN COMPLIANCE WITH CHX ARTICLE 7, RULE9; REASONABLY ENSURE THAT THE COMPUTER-GENERATED REPORTSWHICH WERE SUBMITTED COMPLIED WITH ITS WRITTEN SUPERVISORYPROCEDURES; AND ADEQUATELY COMPARE ITS COMPUTER-GENERATEDREPORTS WITH ITS STOCK RECORD TO REASONABLY ENSURE ITSSYSTEM LOGIC WAS ACCURATELY PREPARING ITS SHORT POSITIONREPORTS.
Resolution Date: 04/24/2018
Resolution:
Other Sanctions Ordered:
Sanction Details: THE TOTAL FINE WAS $65,000.00. THE TOTAL AMOUNT WAS LEVIEDAGAINST VIRTU FINANCIAL BD, LLC. NO PART WAS WAIVED AND IT WASPAID IN FULL ON MAY 4, 2018.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
No
Sanctions Ordered: Monetary/Fine $65,000.00
Decision & Order of Offer of Settlement
iReporting Source: Firm
Allegations: THE FIRM, WITHOUT ADMITTING OR DENYING, CONSENTED TO THE ENTRYOF AN ORDER INSTITUTING PROCEEDINGS AND MAKING FINDINGS THATON CERTAIN SETTLEMENT DATES FROM JULY 31, 2013 TO FEBRUARY 27,2015, THE FIRM SUBMITTED INACCURATE SHORT POSITION REPORTS, ORFAILED TO SUBMIT SHORT POSITION REPORTS AND FAILED TO MAINTAINAND ENFORCE REASONABLE SUPERVISORY PROCEDURES AND REVIEWSYSTEM-GENERATED REPORTS TO ENSURE THAT ACCURATE SHORTPOSITION REPORTS WERE BEING SUBMITTED. THE FIRM ALSOCONSENTED TO A FINE IN THE AMOUNT OF $65,000.
THE FIRM, WITHOUT ADMITTING OR DENYING, CONSENTED TO THE ENTRYOF AN ORDER INSTITUTING PROCEEDINGS AND MAKING FINDINGS THATON CERTAIN SETTLEMENT DATES FROM JULY 31, 2013 TO FEBRUARY 27,2015, THE FIRM SUBMITTED INACCURATE SHORT POSITION REPORTS, ORFAILED TO SUBMIT SHORT POSITION REPORTS AND FAILED TO MAINTAINAND ENFORCE REASONABLE SUPERVISORY PROCEDURES AND REVIEWSYSTEM-GENERATED REPORTS TO ENSURE THAT ACCURATE SHORTPOSITION REPORTS WERE BEING SUBMITTED. THE FIRM ALSOCONSENTED TO A FINE IN THE AMOUNT OF $65,000.
Resolution Date: 04/24/2018
Resolution:
Other Sanctions Ordered:
Sanction Details: VIRTU CONSENTED TO A $65,000.00 FINE.
Sanctions Ordered: Monetary/Fine $65,000.00
Decision & Order of Offer of Settlement
Disclosure 6 of 17
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Reporting Source: Regulator
Allegations: THE FIRM HEREBY ACCEPTS AND CONSENTS, WITHOUT ADMITTING ORDENYING THE FINDINGS, AND SOLELY FOR THE PURPOSES OF THISPROCEEDING AND ANY OTHER PROCEEDING BROUGHT BY OR ON BEHALFOF BATS BZX EXCHANGE, INC. (BZX), OR TO WHICH BZX IS A PARTY, PRIORTO A HEARING AND WITHOUT AN ADJUDICATION OF ANY ISSUE OF LAW ORFACT, TO THE ENTRY OF THE FOLLOWING FINDINGS BY BZX. DURING THEREVIEW PERIOD, ON APPROXIMATELY 699 OCCASIONS, THE FIRM HADSUBSTANTIAL AND CONTINUED FAILURES TO MAINTAIN ITS CONTINUOUSTWO-SIDED QUOTATION OBLIGATION IN SECURITIES IN WHICH IT HADBEEN REGISTERED AS A MARKET MAKER. AS A RESULT, THE FIRMVIOLATED BZX RULE 11.8. DURING THE REVIEW PERIOD, THE FIRM DIDNOT HAVE A SUPERVISORY SYSTEM IN PLACE REASONABLY DESIGNED TOENSURE COMPLIANCE WITH BZX RULE 11.8. THE FIRM USED A MARKETMAKING STRATEGY REPORT (THE "REPORT") THAT TOOK INTO ACCOUNTTHE FIRM'S QUOTES ON ALL MARKETS AND CONSEQUENTLY IT FAILED TODETECT OUTAGES ON BZX. THE REPORT WAS INADEQUATELY DESIGNEDTO DETECT GAPS IN THE FIRM'S QUOTING ON BZX AND THUS DID NOTPROVIDE AN ADEQUATE SUPERVISORY SYSTEM TO ENSURE COMPLIANCEWITH BZX RULE 11.8. IN ADDITION, THE REPORT WAS NOT ANAPPROPRIATE RECORD THAT ALLOWED THE FIRM TO CARRY OUT ITSSUPERVISORY RESPONSIBILITY RELATED TO ENSURING COMPLIANCEWITH BZX RULE 11.8. AS A RESULT, THE FIRM VIOLATED BZX RULES 3.1, 5.1AND 5.3.
THE FIRM HEREBY ACCEPTS AND CONSENTS, WITHOUT ADMITTING ORDENYING THE FINDINGS, AND SOLELY FOR THE PURPOSES OF THISPROCEEDING AND ANY OTHER PROCEEDING BROUGHT BY OR ON BEHALFOF BATS BZX EXCHANGE, INC. (BZX), OR TO WHICH BZX IS A PARTY, PRIORTO A HEARING AND WITHOUT AN ADJUDICATION OF ANY ISSUE OF LAW ORFACT, TO THE ENTRY OF THE FOLLOWING FINDINGS BY BZX. DURING THEREVIEW PERIOD, ON APPROXIMATELY 699 OCCASIONS, THE FIRM HADSUBSTANTIAL AND CONTINUED FAILURES TO MAINTAIN ITS CONTINUOUSTWO-SIDED QUOTATION OBLIGATION IN SECURITIES IN WHICH IT HADBEEN REGISTERED AS A MARKET MAKER. AS A RESULT, THE FIRMVIOLATED BZX RULE 11.8. DURING THE REVIEW PERIOD, THE FIRM DIDNOT HAVE A SUPERVISORY SYSTEM IN PLACE REASONABLY DESIGNED TOENSURE COMPLIANCE WITH BZX RULE 11.8. THE FIRM USED A MARKETMAKING STRATEGY REPORT (THE "REPORT") THAT TOOK INTO ACCOUNTTHE FIRM'S QUOTES ON ALL MARKETS AND CONSEQUENTLY IT FAILED TODETECT OUTAGES ON BZX. THE REPORT WAS INADEQUATELY DESIGNEDTO DETECT GAPS IN THE FIRM'S QUOTING ON BZX AND THUS DID NOTPROVIDE AN ADEQUATE SUPERVISORY SYSTEM TO ENSURE COMPLIANCEWITH BZX RULE 11.8. IN ADDITION, THE REPORT WAS NOT ANAPPROPRIATE RECORD THAT ALLOWED THE FIRM TO CARRY OUT ITSSUPERVISORY RESPONSIBILITY RELATED TO ENSURING COMPLIANCEWITH BZX RULE 11.8. AS A RESULT, THE FIRM VIOLATED BZX RULES 3.1, 5.1AND 5.3.
Resolution Date: 07/21/2017
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM WAS CENSURED AND FINED $45,000. THE DECISION BECAMEFINAL ON JULY 21, 2017.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT IT FAILED ON 699 OCCASIONS TOMAINTAIN CONTINUOUS TWO-SIDED QUOTATION FOR SECURITIES INWHICH IT WAS REGISTERED AS A MARKET MAKER , IN VIOLATION OF BZXRULE 11.8. ADDITIONALLY, THE FIRM CONSENTED TO THE ENTRY OFFINDINGS THAT IT'S SUPERVISORY SYSTEM WAS NOT REASONABLYDESIGNED TO ENSURE COMPLIANCE WITH BZX RULE 11.8, IN VIOLATIONOF BZX RULES 3.1, 5.1, AND 5.3.
Principal Product Type: Equity Listed (Common & Preferred Stock)
Other Product Type(s):
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT IT FAILED ON 699 OCCASIONS TOMAINTAIN CONTINUOUS TWO-SIDED QUOTATION FOR SECURITIES INWHICH IT WAS REGISTERED AS A MARKET MAKER , IN VIOLATION OF BZXRULE 11.8. ADDITIONALLY, THE FIRM CONSENTED TO THE ENTRY OFFINDINGS THAT IT'S SUPERVISORY SYSTEM WAS NOT REASONABLYDESIGNED TO ENSURE COMPLIANCE WITH BZX RULE 11.8, IN VIOLATIONOF BZX RULES 3.1, 5.1, AND 5.3.
Resolution Date: 06/21/2017
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM WILL PAY THE FINE WHEN DUE.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ON VARIOUS DATES IN 2015 THE FIRMENTERED ORDERS FOR TRADE AT SETTLEMENT (TAS) IN CBOEVOLATILITY INDEX FUTURES PRIOR TO THE PRE-OPEN THAT WEREREJECTED, IN VIOLATION OF CFE RULE 608.
Sanction Details: THE $25,000 FINE WAS PAID ON 12/22/2016.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Sanctions Ordered: Monetary/Fine $25,000.00
Decision
Disclosure 8 of 17
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Reporting Source: Regulator
Allegations: A FINRA HEARING OFFICER CONSIDERED AN OFFER OF SETTLEMENT ANDCONSENT ENTERED INTO BETWEEN FINRA ON BEHALF OF NYSEREGULATION, INC. AND THE FIRM.THE FIRM SUBMITTED AN OFFER OF SETTLEMENT AND CONSENT FORTHE SOLE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING,WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT, AND WITHOUTADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERRED TOIN THE OFFER OF SETTLEMENT.THE HEARING OFFICER ACCEPTS THE OFFER OF SETTLEMENT ANDCONSENT AND ISSUES THIS DECISION.IN APPROXIMATELY 57,045 INSTANCES DURING THE REVIEW PERIOD, THEFIRM FAILED TO ENTER AND MAINTAIN CONTINUOUS, TWO-SIDEDTRADING INTEREST WITHIN THE DESIGNATED PERCENTAGE ABOVE ANDBELOW THE NATIONAL BEST BID AND OFFER (NBBO) AS REQUIRED BY THEAPPLICABLE NYSE ARCA EQUITIES RULE.
THE FINDINGS STATED THAT THE FIRM, IN APPROXIMATELY 2,854INSTANCES, FAILED TO AFFIX THE PROPER MARKET MAKER ID (MMID) TOITS QUOTES, THUS FAILING TO MEET THE CONTINUOUS QUOTINGOBLIGATIONS OF NYSE ARCA EQUITIES RULE 7.23.
THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH ANDMAINTAIN A SUPERVISORY SYSTEM THAT WAS REASONABLY DESIGNEDTO ENSURE COMPLIANCE WITH THE REQUIREMENTS OF SEC RULE 101 OFREGULATION.
THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO DETECT,IDENTIFY, AND REMEDY PERSISTENT QUOTING FAILURES. THE FIRMFAILED TO REASONABLY SUPERVISE THE ACTIVITIES OF ITS ASSOCIATEDPERSONS AND THE OPERATION OF ITS BUSINESS BY ESTABLISHING ANDMAINTAINING ADEQUATE SUPERVISORY PROCEDURES, INCLUDINGWRITTEN PROCEDURES, AND A REASONABLE SYSTEM OF FOLLOW-UPAND REVIEW THAT WERE REASONABLY DESIGNED TO ENSURECOMPLIANCE WITH NYSE ARCA EQUITIES RULE 7.23.
Principal Product Type: Equity Listed (Common & Preferred Stock)
Other Product Type(s):
A FINRA HEARING OFFICER CONSIDERED AN OFFER OF SETTLEMENT ANDCONSENT ENTERED INTO BETWEEN FINRA ON BEHALF OF NYSEREGULATION, INC. AND THE FIRM.THE FIRM SUBMITTED AN OFFER OF SETTLEMENT AND CONSENT FORTHE SOLE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING,WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT, AND WITHOUTADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERRED TOIN THE OFFER OF SETTLEMENT.THE HEARING OFFICER ACCEPTS THE OFFER OF SETTLEMENT ANDCONSENT AND ISSUES THIS DECISION.IN APPROXIMATELY 57,045 INSTANCES DURING THE REVIEW PERIOD, THEFIRM FAILED TO ENTER AND MAINTAIN CONTINUOUS, TWO-SIDEDTRADING INTEREST WITHIN THE DESIGNATED PERCENTAGE ABOVE ANDBELOW THE NATIONAL BEST BID AND OFFER (NBBO) AS REQUIRED BY THEAPPLICABLE NYSE ARCA EQUITIES RULE.
THE FINDINGS STATED THAT THE FIRM, IN APPROXIMATELY 2,854INSTANCES, FAILED TO AFFIX THE PROPER MARKET MAKER ID (MMID) TOITS QUOTES, THUS FAILING TO MEET THE CONTINUOUS QUOTINGOBLIGATIONS OF NYSE ARCA EQUITIES RULE 7.23.
THE FINDINGS ALSO STATED THAT THE FIRM FAILED TO ESTABLISH ANDMAINTAIN A SUPERVISORY SYSTEM THAT WAS REASONABLY DESIGNEDTO ENSURE COMPLIANCE WITH THE REQUIREMENTS OF SEC RULE 101 OFREGULATION.
THE FINDINGS ALSO INCLUDED THAT THE FIRM FAILED TO DETECT,IDENTIFY, AND REMEDY PERSISTENT QUOTING FAILURES. THE FIRMFAILED TO REASONABLY SUPERVISE THE ACTIVITIES OF ITS ASSOCIATEDPERSONS AND THE OPERATION OF ITS BUSINESS BY ESTABLISHING ANDMAINTAINING ADEQUATE SUPERVISORY PROCEDURES, INCLUDINGWRITTEN PROCEDURES, AND A REASONABLE SYSTEM OF FOLLOW-UPAND REVIEW THAT WERE REASONABLY DESIGNED TO ENSURECOMPLIANCE WITH NYSE ARCA EQUITIES RULE 7.23.
Resolution Date: 12/20/2016
Resolution:
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Sanction Details: THE FIRM WAS CENSURED AND FINED $70,000. WITH AN UNDERTAKING:ALSO, THE FIRM IS ORDERED TO ADDRESS DEFICIENCIES IN ITS WRITTENSUPERVISORY PROCEDURES TO ENSURE THAT IT HAS IMPLEMENTEDPROCEDURES THAT ARE REASONABLY DESIGNED TO ACHIEVECOMPLIANCE WITH THE APPLICABLE RULES AND REGULATIONSPERTAINING TO MARKET MAKER QUOTING OBLIGATIONS.
Regulator Statement THE FIRM VIOLATED NYSE ARCA EQUITIES RULE 7.23 BY FAILING TOMAINTAIN CONTINUOUS, TWO-SIDED TRADING INTEREST INAPPROXIMATELY 57,045 INSTANCES; NYSE ARCA EQUITIES RULE 7.23 BYFAILING TO AFFIX THE PROPER MMID IN 2,854 INSTANCES; NYSE ARCAEQUITIES RULES 6.18(B) AND (C) BY FAILING TO REASONABLY SUPERVISETHE ACTIVITIES OF ITS ASSOCIATED PERSONS AND THE OPERATION OFITS BUSINESS IN THAT IT FAILED TO ESTABLISH AND MAINTAIN ADEQUATESUPERVISORY PROCEDURES, INCLUDING WRITTEN PROCEDURES, AND AREASONABLE SYSTEM OF FOLLOW-UP AND REVIEW, DESIGNED TOENSURE COMPLIANCE WITH NYSE ARCA EQUITIES RULE 7.23.
Principal Product Type: Equity Listed (Common & Preferred Stock)
Other Product Type(s):
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ON VARIOUS DATES DURING THEPERIOD APRIL 1, 2013 THROUGH DECEMBER 31, 2015 THE FIRM FAILED TOMAINTAIN CONTINUOUS TWO-SIDED TRADING INTEREST WITHIN THEDESIGNATED PERCENTAGE ABOVE AND BELOW THE NBBO IN ONE ORMORE SECURITIES FOR WHICH THE FIRM WAS REGISTERED AS A MARKETMAKER OR FAILED TO AFFIX THE PROPER MARKET MAKER IDENTIFIER TOITS QUOTES IN ORDER TO RECEIVE "CREDIT" FOR SATISFYING THEQUOTING REQUIREMENTS, AS REQUIRED BY NYSE ARCA EQUITIES RULE7.23. ADDITIONALLY, THE FIRM FAILED TO ESTABLISH AND MAINTAIN ASUPERVISORY SYSTEM REASONABLY DESIGNED TO ENSURECOMPLIANCE WITH NYSE ARCA EQUITIES RULE 7.23, IN VIOLATION OFNYSE ARCA EQUITIES RULE 6.18.
Other Sanctions Ordered: THE FIRM HAS AGREED TO REVISE ITS WRITTEN SUPERVISORYPROCEDURES WITH RESPECT TO NYSE ARCA EQUITIES RULE 7.23.
Sanction Details: VFBD WILL PAY THE $70,000 FINE WHEN INVOICED.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Allegations: VIRTU FINANCIAL BD, LLC VIOLATED CHX ARTICLE 7, RULE 9, WHEN ONSETTLEMENT DATES FROM JANUARY 29, TO DECEMBER 31, 2010, THEFIRM SUBMITTED INACCURATE SHORT POSITION REPORTS, OR FAILED TOSUBMIT SHORT POSITION REPORTS AS FOLLOWS: (1) BETWEEN MARCH15 AND OCTOBER 29, 2010, ON 13 SETTLEMENT DATES, VIRTU FINANCIALBD, LLC FAILED TO REPORT 122 SHORT POSITIONS TOTALING 1,283,059SHARES OF VARIOUS SECURITIES; (2) BETWEEN JANUARY 29 ANDOCTOBER 29, 2010, ON 13 SETTLEMENT DATES, VIRTU FINANCIAL BD, LLCINACCURATELY REPORTED 253 SHORT POSITIONS, WHICH INVOLVED THEOVER REPORTING OF 1,025,383 SHARES OF VARIOUS STOCKS, AND THEUNDER REPORTING OF 707,058 SHARES OF OTHER STOCKS; AND, (3)BETWEEN FEBRUARY 12 AND DECEMBER 31, 2010, ON 21 SETTLEMENTDATES, VIRTU FINANCIAL BD, LLC INACCURATELY REPORTED 138 SHORTPOSITIONS TOTALING 6,435,842 SHARES OF VARIOUS SECURITIES, WHENIT DID NOT MAINTAIN SHORT POSITIONS FOR THOSE SECURITIES. VIRTUFINANCIAL BD, LLC ALSO VIOLATED CHX ARTICLE 6, RULE 5(B) WHENDURING 2010, THE FIRM FAILED TO MAINTAIN AND ENFORCE REASONABLESUPERVISORY PROCEDURES AND LACKED REASONABLY EFFECTIVETRAINING AND INTERNAL CONTROLS, TO ENSURE THAT ACCURATE SHORTPOSITION REPORTS WERE BEING SUBMITTED. SPECIFICALLY, THE FIRM'SPROCEDURES DID NOT REFERENCE CHX RULES AND LACKED DETAIL ASTO THE NATURE OF THE FIRM'S SHORT POSITIONS THAT NEEDED TO BEREPORTED. IN ADDITION, THE FIRM FAILED TO THOROUGHLY TRAIN ITSEMPLOYEES WHO WERE ENGAGED IN SHORT POSITION REPORTING.RATHER, EMPLOYEES WERE ONLY TRAINED ON HOW THE FIRM'SCOMPUTER SYSTEMS HANDLED SHORT POSITIONS. THERE WAS ALSO NOEVIDENCE OF THE DEVELOPMENT OR TESTING OF THE COMPUTERSYSTEM USED FOR SHORT POSITION REPORTING, AFTER IT WASACQUIRED THROUGH THE PURCHASE OF ANOTHER BROKER-DEALER, TOENSURE THAT IT ACCURATELY REPORTED SHORT POSITIONS BASED ONTHE NATURE OF THE FIRM'S ACCOUNT STRUCTURE.
VIRTU FINANCIAL BD, LLC VIOLATED CHX ARTICLE 7, RULE 9, WHEN ONSETTLEMENT DATES FROM JANUARY 29, TO DECEMBER 31, 2010, THEFIRM SUBMITTED INACCURATE SHORT POSITION REPORTS, OR FAILED TOSUBMIT SHORT POSITION REPORTS AS FOLLOWS: (1) BETWEEN MARCH15 AND OCTOBER 29, 2010, ON 13 SETTLEMENT DATES, VIRTU FINANCIALBD, LLC FAILED TO REPORT 122 SHORT POSITIONS TOTALING 1,283,059SHARES OF VARIOUS SECURITIES; (2) BETWEEN JANUARY 29 ANDOCTOBER 29, 2010, ON 13 SETTLEMENT DATES, VIRTU FINANCIAL BD, LLCINACCURATELY REPORTED 253 SHORT POSITIONS, WHICH INVOLVED THEOVER REPORTING OF 1,025,383 SHARES OF VARIOUS STOCKS, AND THEUNDER REPORTING OF 707,058 SHARES OF OTHER STOCKS; AND, (3)BETWEEN FEBRUARY 12 AND DECEMBER 31, 2010, ON 21 SETTLEMENTDATES, VIRTU FINANCIAL BD, LLC INACCURATELY REPORTED 138 SHORTPOSITIONS TOTALING 6,435,842 SHARES OF VARIOUS SECURITIES, WHENIT DID NOT MAINTAIN SHORT POSITIONS FOR THOSE SECURITIES. VIRTUFINANCIAL BD, LLC ALSO VIOLATED CHX ARTICLE 6, RULE 5(B) WHENDURING 2010, THE FIRM FAILED TO MAINTAIN AND ENFORCE REASONABLESUPERVISORY PROCEDURES AND LACKED REASONABLY EFFECTIVETRAINING AND INTERNAL CONTROLS, TO ENSURE THAT ACCURATE SHORTPOSITION REPORTS WERE BEING SUBMITTED. SPECIFICALLY, THE FIRM'SPROCEDURES DID NOT REFERENCE CHX RULES AND LACKED DETAIL ASTO THE NATURE OF THE FIRM'S SHORT POSITIONS THAT NEEDED TO BEREPORTED. IN ADDITION, THE FIRM FAILED TO THOROUGHLY TRAIN ITSEMPLOYEES WHO WERE ENGAGED IN SHORT POSITION REPORTING.RATHER, EMPLOYEES WERE ONLY TRAINED ON HOW THE FIRM'SCOMPUTER SYSTEMS HANDLED SHORT POSITIONS. THERE WAS ALSO NOEVIDENCE OF THE DEVELOPMENT OR TESTING OF THE COMPUTERSYSTEM USED FOR SHORT POSITION REPORTING, AFTER IT WASACQUIRED THROUGH THE PURCHASE OF ANOTHER BROKER-DEALER, TOENSURE THAT IT ACCURATELY REPORTED SHORT POSITIONS BASED ONTHE NATURE OF THE FIRM'S ACCOUNT STRUCTURE.
Resolution Date: 11/09/2016
Resolution:
Other Sanctions Ordered:
Sanction Details: THE ENTIRE FINE WAS ASSESSED AGAINST VIRTU FINANCIAL BD, LLC ANDNO PART OF THE FINE WAS WAIVED. THE FINE WAS PAID IN FULL ONNOVEMBER 17, 2016.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ON VARIOUS SETTLEMENT DATESFROM JANUARY 20, 2010 THROUGH DECEMBER 31, 2010, THE FIRMSUBMITTED INACCURATE SHORT POSITION REPORTS, OR FAILED TOSUBMIT SHORT POSITION REPORTS, IN VIOLATION OF CHX ARTICLE 7,RULE 9, AND FAILED TO MAINTAIN AND ENFORCE REASONABLESUPERVISORY PROCEDURES TO ENSURE COMPLIANCE WITH THE CHX'SSHORT POSITION REPORTING RULES, IN VIOLATION OF CHX ARTICLE 6,RULE 5(B).
Current Status: Final
Resolution Date: 11/09/2016
Resolution:
Other Sanctions Ordered:
Sanction Details: THE $60,000 FINE WAS PAID ON 11/17/2016.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Sanctions Ordered: Monetary/Fine $60,000.00
Decision & Order of Offer of Settlement
Disclosure 10 of 17
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Reporting Source: Regulator
Allegations: THE FIRM FAILED TO ESTABLISH, DOCUMENT, AND MAINTAIN A SYSTEM OFRISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURESREASONABLY DESIGNED TO PREVENT THE ENTRY OF ERRONEOUSORDERS AND FAILED TO ESTABLISH, IMPLEMENT, AND MAINTAINADEQUATE SUPERVISORY PROCEDURES AND A SYSTEM OF FOLLOW-UPAND REVIEW, INCLUDING WRITTEN SUPERVISORY PROCEDURES,REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH SECURITIESEXCHANGE ACT OF 1934 RULE 15C3-5. THE FINDINGS STATED THATBECAUSE A DIVIDEND WAS NOT PROPERLY ACCOUNTED FOR BY THEFIRM IN ITS TRADING AND PRICING SYSTEMS, WHEN THE FIRM'S TRADINGMODELS COMMENCED TRADING ON THE MORNING OF JULY 25, 2012,THEY MISPRICED A COMPANY'S OPTIONS WITH AN EXPIRATION DATE ONOR AFTER AUGUST 16, 2012. WHILE EACH ORDER PLACED AND EXECUTEDWAS SUBJECTED TO THE FIRM'S PRE-TRADE RISK CONTROLS, DUE TOTHE FAILURE TO ADJUST FOR THE EXPECTED DIVIDEND, ALMOST ALL OFTHE COMPANY'S OPTIONS CONTRACTS WITH AUGUST 2012 EXPIRATIONDATES WERE EXECUTED AT UNFAVORABLE PRICES, RESULTING IN A LOSSTO THE FIRM OF ALMOST $3.7 MILLION. THE FIRM REQUESTED OBVIOUSERROR RULINGS FOR ANY MISPRICED COMPANY EXECUTIONS ACROSSALL EXCHANGES. HOWEVER, WHILE THE FIRM'S EXECUTIONS WERE ATPRICES AWAY FROM THE NATIONAL BEST BID AND OFFER (NBBO), THEVAST MAJORITY OF EXECUTIONS DID NOT MEET THE OBVIOUS ERRORREQUIREMENTS AND ONLY A VERY SMALL NUMBER OF TRADES WEREBROKEN, ADJUSTED OR OTHERWISE UNWOUND BY THE EXCHANGES.WHEN THE FIRM'S REGISTERED OPTIONS PRINCIPAL NOTICED THATCERTAIN TRADING STRATEGIES WERE "LOCKING DOWN" (I.E., PREVENTEDFROM PLACING ADDITIONAL ORDERS UNTIL UNLOCKED BY ANAUTHORIZED RISK MANAGER) DUE TO THE FIRM'S PRE-TRADE RISKCONTROLS, HE BELIEVED THAT THOSE LOCKDOWNS WERE RELATED TOMARKET-DATA ISSUES AND THUS BEGAN MANUALLY RESETTING THESTRATEGIES, THEREBY PERMITTING THE RELEVANT STRATEGY TOCONTINUE PLACING ORDERS SUBJECT TO THE FIRM'S MAXIMUMDISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL, WHICH WAS SETTO $1.00 AT THE TIME. BECAUSE THE REGISTERED OPTIONS PRINCIPALMANUALLY RESET A TOTAL OF 72 LOCKDOWNS (WITHOUT DISABLING THEMAXIMUM DISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL), THEFIRM'S STRATEGIES CONTINUED TO SUBMIT ORDERS IN THE COMPANYTHAT, WHILE STILL SUBJECT TO THE FIRM'S PRE-TRADE RISK CONTROLS,WERE MISPRICED AND WERE ALSO DISADVANTAGEOUS TO THE FIRM. INADDITION, BECAUSE THE FIRM'S PRE-TRADE RISK CONTROLS WEREAPPLIED TO EACH OPTIONS SERIES INDIVIDUALLY RATHER THAN THEFIRM'S AGGREGATE POSITION IN THE UNDERLYING SECURITY, MANY OFTHE FIRM'S OTHER PRE-TRADE RISK CONTROLS WERE NOT TRIGGERED,THEREBY CONTRIBUTING TO THE FIRM'S FAILURE TO DETECT ANDPREVENT THE ENTRY OF ERRONEOUS ORDERS. AS A RESULT OF THECONDUCT, THE FIRM VIOLATED SECURITIES EXCHANGE ACT OF 1934RULE 15C3-5(C)(1)(II) AND NYSE ARCA OPTIONS RULE 11.18.
THE FIRM FAILED TO ESTABLISH, DOCUMENT, AND MAINTAIN A SYSTEM OFRISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURESREASONABLY DESIGNED TO PREVENT THE ENTRY OF ERRONEOUSORDERS AND FAILED TO ESTABLISH, IMPLEMENT, AND MAINTAINADEQUATE SUPERVISORY PROCEDURES AND A SYSTEM OF FOLLOW-UPAND REVIEW, INCLUDING WRITTEN SUPERVISORY PROCEDURES,REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH SECURITIESEXCHANGE ACT OF 1934 RULE 15C3-5. THE FINDINGS STATED THATBECAUSE A DIVIDEND WAS NOT PROPERLY ACCOUNTED FOR BY THEFIRM IN ITS TRADING AND PRICING SYSTEMS, WHEN THE FIRM'S TRADINGMODELS COMMENCED TRADING ON THE MORNING OF JULY 25, 2012,THEY MISPRICED A COMPANY'S OPTIONS WITH AN EXPIRATION DATE ONOR AFTER AUGUST 16, 2012. WHILE EACH ORDER PLACED AND EXECUTEDWAS SUBJECTED TO THE FIRM'S PRE-TRADE RISK CONTROLS, DUE TOTHE FAILURE TO ADJUST FOR THE EXPECTED DIVIDEND, ALMOST ALL OFTHE COMPANY'S OPTIONS CONTRACTS WITH AUGUST 2012 EXPIRATIONDATES WERE EXECUTED AT UNFAVORABLE PRICES, RESULTING IN A LOSSTO THE FIRM OF ALMOST $3.7 MILLION. THE FIRM REQUESTED OBVIOUSERROR RULINGS FOR ANY MISPRICED COMPANY EXECUTIONS ACROSSALL EXCHANGES. HOWEVER, WHILE THE FIRM'S EXECUTIONS WERE ATPRICES AWAY FROM THE NATIONAL BEST BID AND OFFER (NBBO), THEVAST MAJORITY OF EXECUTIONS DID NOT MEET THE OBVIOUS ERRORREQUIREMENTS AND ONLY A VERY SMALL NUMBER OF TRADES WEREBROKEN, ADJUSTED OR OTHERWISE UNWOUND BY THE EXCHANGES.WHEN THE FIRM'S REGISTERED OPTIONS PRINCIPAL NOTICED THATCERTAIN TRADING STRATEGIES WERE "LOCKING DOWN" (I.E., PREVENTEDFROM PLACING ADDITIONAL ORDERS UNTIL UNLOCKED BY ANAUTHORIZED RISK MANAGER) DUE TO THE FIRM'S PRE-TRADE RISKCONTROLS, HE BELIEVED THAT THOSE LOCKDOWNS WERE RELATED TOMARKET-DATA ISSUES AND THUS BEGAN MANUALLY RESETTING THESTRATEGIES, THEREBY PERMITTING THE RELEVANT STRATEGY TOCONTINUE PLACING ORDERS SUBJECT TO THE FIRM'S MAXIMUMDISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL, WHICH WAS SETTO $1.00 AT THE TIME. BECAUSE THE REGISTERED OPTIONS PRINCIPALMANUALLY RESET A TOTAL OF 72 LOCKDOWNS (WITHOUT DISABLING THEMAXIMUM DISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL), THEFIRM'S STRATEGIES CONTINUED TO SUBMIT ORDERS IN THE COMPANYTHAT, WHILE STILL SUBJECT TO THE FIRM'S PRE-TRADE RISK CONTROLS,WERE MISPRICED AND WERE ALSO DISADVANTAGEOUS TO THE FIRM. INADDITION, BECAUSE THE FIRM'S PRE-TRADE RISK CONTROLS WEREAPPLIED TO EACH OPTIONS SERIES INDIVIDUALLY RATHER THAN THEFIRM'S AGGREGATE POSITION IN THE UNDERLYING SECURITY, MANY OFTHE FIRM'S OTHER PRE-TRADE RISK CONTROLS WERE NOT TRIGGERED,THEREBY CONTRIBUTING TO THE FIRM'S FAILURE TO DETECT ANDPREVENT THE ENTRY OF ERRONEOUS ORDERS. AS A RESULT OF THECONDUCT, THE FIRM VIOLATED SECURITIES EXCHANGE ACT OF 1934RULE 15C3-5(C)(1)(II) AND NYSE ARCA OPTIONS RULE 11.18.
Resolution Date: 10/08/2015
Resolution:
Other Sanctions Ordered: UNDERTAKING: REVISE ITS POLICIES AND PROCEDURES, INCLUDING ITSWRITTEN SUPERVISORY PROCEDURES, TO ESTABLISH AND MAINTAINADEQUATE SUPERVISORY PROCEDURES: (I) RELATED TO THE USE OFPRE-TRADE CONTROLS WITH MORE RESTRICTIVE PARAMETERS THANTHE FIRM-WIDE PRE-TRADE RISK CONTROLS, INCLUDING THE MANUALRESETTING OF TRADING STRATEGIES RESTRICTED BY SUCH CONTROLS;AND (II) TO ENSURE SUFFICIENT OVERSIGHT AND REVIEW OF THE RESETOF TRADING STRATEGIES THAT ARE RESTRICTED BY ONE OR MORE FIRM-WIDE PRE-TRADE RISK CONTROLS.
Sanction Details: A HEARING OFFICER AT THE FINANCIAL INDUSTRY REGULATORYAUTHORITY (FINRA) CONSIDERED AN OFFER OF SETTLEMENT ANDCONSENT ENTERED INTO BETWEEN FINRA'S DEPARTMENT OF MARKETREGULATION ON BEHALF OF NYSE REGULATION, INC. AND VIRTUFINANCIAL BD LLC. THE OFFER OF SETTLEMENT AND CONSENT WASSUBMITTED FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN. THE HEARING OFFICER ACCEPTS THE OFFER OFSETTLEMENT AND CONSENT AND ISSUES THIS DECISION IN ACCORDANCEWITH NYSE ARCA OPTIONS RULES. THE FIRM IS CENSURED, FINED$20,000 AND ORDERED TO REVISE ITS POLICIES AND PROCEDURES,INCLUDING ITS WRITTEN SUPERVISORY PROCEDURES, TO ESTABLISHAND MAINTAIN ADEQUATE SUPERVISORY PROCEDURES: (I) RELATED TOTHE USE OF PRE-TRADE CONTROLS WITH MORE RESTRICTIVEPARAMETERS THAN THE FIRM-WIDE PRE-TRADE RISK CONTROLS,INCLUDING THE MANUAL RESETTING OF TRADING STRATEGIESRESTRICTED BY SUCH CONTROLS; AND (II) TO ENSURE SUFFICIENTOVERSIGHT AND REVIEW OF THE RESET OF TRADING STRATEGIES THATARE RESTRICTED BY ONE OR MORE FIRM-WIDE PRE-TRADE RISKCONTROLS.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
A HEARING OFFICER AT THE FINANCIAL INDUSTRY REGULATORYAUTHORITY (FINRA) CONSIDERED AN OFFER OF SETTLEMENT ANDCONSENT ENTERED INTO BETWEEN FINRA'S DEPARTMENT OF MARKETREGULATION ON BEHALF OF NYSE REGULATION, INC. AND VIRTUFINANCIAL BD LLC. THE OFFER OF SETTLEMENT AND CONSENT WASSUBMITTED FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN. THE HEARING OFFICER ACCEPTS THE OFFER OFSETTLEMENT AND CONSENT AND ISSUES THIS DECISION IN ACCORDANCEWITH NYSE ARCA OPTIONS RULES. THE FIRM IS CENSURED, FINED$20,000 AND ORDERED TO REVISE ITS POLICIES AND PROCEDURES,INCLUDING ITS WRITTEN SUPERVISORY PROCEDURES, TO ESTABLISHAND MAINTAIN ADEQUATE SUPERVISORY PROCEDURES: (I) RELATED TOTHE USE OF PRE-TRADE CONTROLS WITH MORE RESTRICTIVEPARAMETERS THAN THE FIRM-WIDE PRE-TRADE RISK CONTROLS,INCLUDING THE MANUAL RESETTING OF TRADING STRATEGIESRESTRICTED BY SUCH CONTROLS; AND (II) TO ENSURE SUFFICIENTOVERSIGHT AND REVIEW OF THE RESET OF TRADING STRATEGIES THATARE RESTRICTED BY ONE OR MORE FIRM-WIDE PRE-TRADE RISKCONTROLS.
Regulator Statement UNDER THE OFFER OF SETTLEMENT AND CONSENT, VIRTU FINANCIAL SDLLC AGREED TO PAY A TOTAL FINE OF $60,000, OF WHICH $20,000 SHALLBE PAID TO NYSE ARCA AND THE REMAINING AMOUNT SHALL BE PAID TO(I) NYSE MKT LLC; AND (II) NASDAQ OPTIONS MARKET LLC INACCORDANCE WITH THE TERMS OF PARALLEL SETTLEMENTAGREEMENTS IN RELATED MATTERS BETWEEN VIRTU FINANCIAL ANDEACH OF THESE SELF-REGULATORY ORGANIZATIONS.
iReporting Source: Firm
Initiated By: NYSE ARCA, INC.
Principal Sanction(s)/ReliefSought:
Civil and Administrative Penalt(ies) /Fine(s)
Other Sanction(s)/ReliefSought:
Date Initiated: 10/08/2015
Docket/Case Number: 2012033412203
Principal Product Type: Options
Other Product Type(s):
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ITS SYSTEM OF RISK MANAGEMENTCONTROLS AND SUPERVISORY PROCEDURES WERE NOT REASONABLYDESIGNED TO PREVENT THE ENTRY OF POTENTIALLY ERRONEOUSORDERS, IN VIOLATION OF RULE 15C3-5(C)(1)(II) OF THE SECURITIES ANDEXCHANGE ACT OF 1934, AS AMENDED, AND NYSE ARCA OPTIONS RULE11.18.
Sanction Details: THE FIRM PAID THE $20,000 FINE ON 10/13/2015 AND AGREED TO REVISEITS WRITTEN SUPERVISORY PROCEDURES CONCERNING PRE-TRADERISK CONTROLS.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Allegations: THE FIRM FAILED TO ESTABLISH, DOCUMENT, AND MAINTAIN A SYSTEM OFRISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURESREASONABLY DESIGNED TO PREVENT THE ENTRY OF ERRONEOUSORDERS AND FAILED TO ESTABLISH, IMPLEMENT, AND MAINTAINADEQUATE SUPERVISORY PROCEDURES AND A SYSTEM OF FOLLOW-UPAND REVIEW, INCLUDING WRITTEN SUPERVISORY PROCEDURES,REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH SECURITIESEXCHANGE ACT OF 1934 RULE 15C3-5. THE FINDINGS STATED THATBECAUSE A DIVIDEND WAS NOT PROPERLY ACCOUNTED FOR BY THEFIRM IN ITS TRADING AND PRICING SYSTEMS, WHEN THE FIRM'S TRADINGMODELS COMMENCED TRADING ON THE MORNING OF JULY 25, 2012,THEY MISPRICED A COMPANY'S OPTIONS WITH AN EXPIRATION DATE ONOR AFTER AUGUST 16, 2012. WHILE EACH ORDER PLACED AND EXECUTEDWAS SUBJECTED TO THE FIRM'S PRE-TRADE RISK CONTROLS, DUE TOTHE FAILURE TO ADJUST FOR THE EXPECTED DIVIDEND, ALMOST ALL OFTHE COMPANY'S OPTIONS CONTRACTS WITH AUGUST 2012 EXPIRATIONDATES WERE EXECUTED AT UNFAVORABLE PRICES, RESULTING IN A LOSSTO THE FIRM OF ALMOST $3.7 MILLION. THE FIRM REQUESTED OBVIOUSERROR RULINGS FOR ANY MISPRICED COMPANY EXECUTIONS ACROSSALL EXCHANGES. HOWEVER, WHILE THE FIRM'S EXECUTIONS WERE ATPRICES AWAY FROM THE NATIONAL BEST BID AND OFFER (NBBO), THEVAST MAJORITY OF EXECUTIONS DID NOT MEET THE OBVIOUS ERRORREQUIREMENTS AND ONLY A VERY SMALL NUMBER OF TRADES WEREBROKEN, ADJUSTED OR OTHERWISE UNWOUND BY THE EXCHANGES.WHEN THE FIRM'S REGISTERED OPTIONS PRINCIPAL NOTICED THATCERTAIN TRADING STRATEGIES WERE "LOCKING DOWN" (I.E., PREVENTEDFROM PLACING ADDITIONAL ORDERS UNTIL UNLOCKED BY ANAUTHORIZED RISK MANAGER) DUE TO THE FIRM'S PRE-TRADE RISKCONTROLS, HE BELIEVED THAT THOSE LOCKDOWNS WERE RELATED TOMARKET-DATA ISSUES AND THUS BEGAN MANUALLY RESETTING THESTRATEGIES, THEREBY PERMITTING THE RELEVANT STRATEGY TOCONTINUE PLACING ORDERS SUBJECT TO THE FIRM'S MAXIMUMDISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL, WHICH WAS SETTO $1.00 AT THE TIME. BECAUSE THE REGISTERED OPTIONS PRINCIPALMANUALLY RESET A TOTAL OF 72 LOCKDOWNS (WITHOUT DISABLING THEMAXIMUM DISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL), THEFIRM'S STRATEGIES CONTINUED TO SUBMIT ORDERS IN THE COMPANYTHAT, WHILE STILL SUBJECT TO THE FIRM'S PRE-TRADE RISK CONTROLS,WERE MISPRICED AND WERE ALSO DISADVANTAGEOUS TO THE FIRM. INADDITION, BECAUSE THE FIRM'S PRE-TRADE RISK CONTROLS WEREAPPLIED TO EACH OPTIONS SERIES INDIVIDUALLY RATHER THAN THEFIRM'S AGGREGATE POSITION IN THE UNDERLYING SECURITY, MANY OFTHE FIRM'S OTHER PRE-TRADE RISK CONTROLS WERE NOT TRIGGERED,THEREBY CONTRIBUTING TO THE FIRM'S FAILURE TO DETECT ANDPREVENT THE ENTRY OF ERRONEOUS ORDERS. AS A RESULT OF THECONDUCT, THE FIRM VIOLATED SECURITIES EXCHANGE ACT OF 1934RULE 15C3-5(C)(1)(II) AND NYSE MKT RULE 320.
THE FIRM FAILED TO ESTABLISH, DOCUMENT, AND MAINTAIN A SYSTEM OFRISK MANAGEMENT CONTROLS AND SUPERVISORY PROCEDURESREASONABLY DESIGNED TO PREVENT THE ENTRY OF ERRONEOUSORDERS AND FAILED TO ESTABLISH, IMPLEMENT, AND MAINTAINADEQUATE SUPERVISORY PROCEDURES AND A SYSTEM OF FOLLOW-UPAND REVIEW, INCLUDING WRITTEN SUPERVISORY PROCEDURES,REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH SECURITIESEXCHANGE ACT OF 1934 RULE 15C3-5. THE FINDINGS STATED THATBECAUSE A DIVIDEND WAS NOT PROPERLY ACCOUNTED FOR BY THEFIRM IN ITS TRADING AND PRICING SYSTEMS, WHEN THE FIRM'S TRADINGMODELS COMMENCED TRADING ON THE MORNING OF JULY 25, 2012,THEY MISPRICED A COMPANY'S OPTIONS WITH AN EXPIRATION DATE ONOR AFTER AUGUST 16, 2012. WHILE EACH ORDER PLACED AND EXECUTEDWAS SUBJECTED TO THE FIRM'S PRE-TRADE RISK CONTROLS, DUE TOTHE FAILURE TO ADJUST FOR THE EXPECTED DIVIDEND, ALMOST ALL OFTHE COMPANY'S OPTIONS CONTRACTS WITH AUGUST 2012 EXPIRATIONDATES WERE EXECUTED AT UNFAVORABLE PRICES, RESULTING IN A LOSSTO THE FIRM OF ALMOST $3.7 MILLION. THE FIRM REQUESTED OBVIOUSERROR RULINGS FOR ANY MISPRICED COMPANY EXECUTIONS ACROSSALL EXCHANGES. HOWEVER, WHILE THE FIRM'S EXECUTIONS WERE ATPRICES AWAY FROM THE NATIONAL BEST BID AND OFFER (NBBO), THEVAST MAJORITY OF EXECUTIONS DID NOT MEET THE OBVIOUS ERRORREQUIREMENTS AND ONLY A VERY SMALL NUMBER OF TRADES WEREBROKEN, ADJUSTED OR OTHERWISE UNWOUND BY THE EXCHANGES.WHEN THE FIRM'S REGISTERED OPTIONS PRINCIPAL NOTICED THATCERTAIN TRADING STRATEGIES WERE "LOCKING DOWN" (I.E., PREVENTEDFROM PLACING ADDITIONAL ORDERS UNTIL UNLOCKED BY ANAUTHORIZED RISK MANAGER) DUE TO THE FIRM'S PRE-TRADE RISKCONTROLS, HE BELIEVED THAT THOSE LOCKDOWNS WERE RELATED TOMARKET-DATA ISSUES AND THUS BEGAN MANUALLY RESETTING THESTRATEGIES, THEREBY PERMITTING THE RELEVANT STRATEGY TOCONTINUE PLACING ORDERS SUBJECT TO THE FIRM'S MAXIMUMDISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL, WHICH WAS SETTO $1.00 AT THE TIME. BECAUSE THE REGISTERED OPTIONS PRINCIPALMANUALLY RESET A TOTAL OF 72 LOCKDOWNS (WITHOUT DISABLING THEMAXIMUM DISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL), THEFIRM'S STRATEGIES CONTINUED TO SUBMIT ORDERS IN THE COMPANYTHAT, WHILE STILL SUBJECT TO THE FIRM'S PRE-TRADE RISK CONTROLS,WERE MISPRICED AND WERE ALSO DISADVANTAGEOUS TO THE FIRM. INADDITION, BECAUSE THE FIRM'S PRE-TRADE RISK CONTROLS WEREAPPLIED TO EACH OPTIONS SERIES INDIVIDUALLY RATHER THAN THEFIRM'S AGGREGATE POSITION IN THE UNDERLYING SECURITY, MANY OFTHE FIRM'S OTHER PRE-TRADE RISK CONTROLS WERE NOT TRIGGERED,THEREBY CONTRIBUTING TO THE FIRM'S FAILURE TO DETECT ANDPREVENT THE ENTRY OF ERRONEOUS ORDERS. AS A RESULT OF THECONDUCT, THE FIRM VIOLATED SECURITIES EXCHANGE ACT OF 1934RULE 15C3-5(C)(1)(II) AND NYSE MKT RULE 320.
Resolution Date: 10/21/2015
Resolution:
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Other Sanctions Ordered: REVISE ITS POLICIES AND PROCEDURES, INCLUDING ITS WRITTENSUPERVISORY PROCEDURES, TO ESTABLISH AND MAINTAIN ADEQUATESUPERVISORY PROCEDURES: (I) RELATED TO THE USE OF PRE-TRADECONTROLS WITH MORE RESTRICTIVE PARAMETERS THAN THE FIRM-WIDEPRE-TRADE RISK CONTROLS, INCLUDING THE MANUAL RESETTING OFTRADING STRATEGIES RESTRICTED BY SUCH CONTROLS; AND (II) TOENSURE SUFFICIENT OVERSIGHT AND REVIEW OF THE RESET OFTRADING STRATEGIES THAT ARE RESTRICTED BY ONE OR MORE FIRM-WIDE PRE-TRADE RISK CONTROLS.
Sanction Details: A HEARING OFFICER AT THE FINANCIAL INDUSTRY REGULATORYAUTHORITY (FINRA) CONSIDERED A STIPULATION OF FACTS ANDCONSENT TO PENALTY ENTERED INTO BETWEEN FINRA'S DEPARTMENTOF MARKET REGULATION ON BEHALF OF NYSE REGULATION, INC. ANDVIRTU FINANCIAL BD LLC, A MEMBER ORGANIZATION OF NYSE MKT LLC.THE STIPULATION OF FACTS AND CONSENT TO PENALTY WAS SUBMITTEDFOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING,WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT, AND WITHOUTADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERRED TOTHEREIN. THE HEARING OFFICER ACCEPTS THE STIPULATION OF FACTSAND CONSENT TO PENALTY AND ISSUES THIS DECISION IN ACCORDANCEWITH NYSE MKT RULES. THE FIRM IS CENSURED, FINED $20,000 ANDORDERED TO REVISE ITS POLICIES AND PROCEDURES, INCLUDING ITSWRITTEN SUPERVISORY PROCEDURES, TO ESTABLISH AND MAINTAINADEQUATE SUPERVISORY PROCEDURES: (I) RELATED TO THE USE OFPRE-TRADE CONTROLS WITH MORE RESTRICTIVE PARAMETERS THANTHE FIRM-WIDE PRE-TRADE RISK CONTROLS, INCLUDING THE MANUALRESETTING OF TRADING STRATEGIES RESTRICTED BY SUCH CONTROLS;AND (II) TO ENSURE SUFFICIENT OVERSIGHT AND REVIEW OF THE RESETOF TRADING STRATEGIES THAT ARE RESTRICTED BY ONE OR MORE FIRM-WIDE PRE-TRADE RISK CONTROLS. THE DECISION IS FINAL AS OF THECLOSE OF BUSINESS ON OCTOBER 21, 2015.
Regulator Statement UNDER THE STIPULATION OF FACTS AND CONSENT TO PENALTY, THEFIRM AGREED TO PAY A TOTAL FINE OF $60,000, OF WHICH $20,000 SHALLBE PAID TO NYSE MKT AND THE REMAINING AMOUNT SHALL BE PAID TO (I)NYSE ARCA, INC.; AND (II) NASDAQ OPTIONS MARKET LLC INACCORDANCE WITH THE TERMS OF PARALLEL SETTLEMENTAGREEMENTS IN RELATED MATTERS BETWEEN THE FIRM AND EACH OFTHESE SELF-REGULATORY ORGANIZATIONS.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
www.finra.org/brokercheck User GuidanceUNDER THE STIPULATION OF FACTS AND CONSENT TO PENALTY, THEFIRM AGREED TO PAY A TOTAL FINE OF $60,000, OF WHICH $20,000 SHALLBE PAID TO NYSE MKT AND THE REMAINING AMOUNT SHALL BE PAID TO (I)NYSE ARCA, INC.; AND (II) NASDAQ OPTIONS MARKET LLC INACCORDANCE WITH THE TERMS OF PARALLEL SETTLEMENTAGREEMENTS IN RELATED MATTERS BETWEEN THE FIRM AND EACH OFTHESE SELF-REGULATORY ORGANIZATIONS.
iReporting Source: Firm
Initiated By: NYSE MKT LLC
Principal Sanction(s)/ReliefSought:
Civil and Administrative Penalt(ies) /Fine(s)
Other Sanction(s)/ReliefSought:
Date Initiated: 10/08/2015
Docket/Case Number: 2012033412202
Principal Product Type: Options
Other Product Type(s):
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ITS SYSTEM OF RISK MANAGEMENTCONTROLS AND SUPERVISORY PROCEDURES WERE NOT REASONABLYDESIGNED TO PREVENT THE ENTRY OF POTENTIALLY ERRONEOUSORDERS, IN VIOLATION OF RULE 15C3-5(C)(1)(II) OF THE SECURITIES ANDEXCHANGE ACT OF 1934, AS AMENDED, AND NYSE MKT RULE 320.
Current Status: Final
Resolution Date: 10/22/2015
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM PAID THE $20,000 FINE ON 10/22/2015 AND AGREED TO REVISEITS WRITTEN SUPERVISORY PROCEDURES CONCERNING PRE-TRADERISK CONTROLS.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH, DOCUMENT AND MAINTAIN A SYSTEM OF RISK MANAGEMENTCONTROLS AND SUPERVISORY PROCEDURES REASONABLY DESIGNEDTO PREVENT THE ENTRY OF ERRONEOUS ORDERS AND FAILED TOESTABLISH, IMPLEMENT AND MAINTAIN ADEQUATE SUPERVISORYPROCEDURES AND/OR A SYSTEM OF FOLLOW-UP AND REVIEW,INCLUDING WRITTEN SUPERVISORY PROCEDURES, REASONABLYDESIGNED TO ENSURE COMPLIANCE WITH SECURITIES EXCHANGE ACTOF 1934 RULE 15C3-5. THE FINDINGS STATED THAT BECAUSE A DIVIDENDWAS NOT PROPERLY ACCOUNTED FOR BY THE FIRM IN ITS TRADING ANDPRICING SYSTEMS, WHEN THE FIRM'S TRADING MODELS COMMENCEDTRADING ON THE MORNING OF JULY 25, 2012, THEY MISPRICED ACOMPANY'S OPTIONS WITH AN EXPIRATION DATE ON OR AFTER AUGUST16, 2012. WHILE EACH ORDER PLACED AND EXECUTED WAS SUBJECTEDTO THE FIRM'S PRE-TRADE RISK CONTROLS, DUE TO THE FAILURE TOADJUST FOR THE EXPECTED DIVIDEND, ALMOST ALL OF THE COMPANY'SOPTIONS CONTRACTS WITH AUGUST 2012 EXPIRATION DATES WEREEXECUTED AT UNFAVORABLE PRICES, RESULTING IN A LOSS TO THE FIRMOF ALMOST $3.7 MILLION. THE FIRM REQUESTED OBVIOUS ERRORRULINGS FOR ANY MISPRICED COMPANY EXECUTIONS ACROSS ALLEXCHANGES. HOWEVER, WHILE THE FIRM'S EXECUTIONS WERE ATPRICES AWAY FROM THE NATIONAL BEST BID AND OFFER (NBBO), THEVAST MAJORITY OF EXECUTIONS DID NOT MEET THE OBVIOUS ERRORREQUIREMENTS AND ONLY A VERY SMALL NUMBER OF TRADES WEREBROKEN, ADJUSTED OR OTHERWISE UNWOUND BY THE EXCHANGES.WHEN THE FIRM'S REGISTERED OPTIONS PRINCIPAL NOTICED THATCERTAIN TRADING STRATEGIES WERE "LOCKING DOWN" (I.E., PREVENTEDFROM PLACING ADDITIONAL ORDERS UNTIL UNLOCKED BY ANAUTHORIZED RISK MANAGER) DUE TO THE FIRM'S PRE-TRADE RISKCONTROLS, HE BELIEVED THAT THOSE LOCKDOWNS WERE RELATED TOMARKET-DATA ISSUES AND THUS BEGAN MANUALLY RESETTING THESTRATEGIES, THEREBY PERMITTING THE RELEVANT STRATEGY TOCONTINUE PLACING ORDERS SUBJECT TO THE FIRM'S MAXIMUMDISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL, WHICH WAS SETTO $1.00 AT THE TIME. BECAUSE THE REGISTERED OPTIONS PRINCIPALMANUALLY RESET A TOTAL OF 72 LOCKDOWNS (WITHOUT DISABLING THEMAXIMUM DISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL), THEFIRM'S STRATEGIES CONTINUED TO SUBMIT ORDERS IN THE COMPANYTHAT, WHILE STILL SUBJECT TO THE FIRM'S PRE-TRADE RISK CONTROLS,WERE MISPRICED AND WERE ALSO DISADVANTAGEOUS TO THE FIRM. INADDITION, BECAUSE THE FIRM'S PRE-TRADE RISK CONTROLS WEREAPPLIED TO EACH OPTIONS SERIES INDIVIDUALLY RATHER THAN THEFIRM'S AGGREGATE POSITION IN THE UNDERLYING SECURITY, MANY OFTHE FIRM'S OTHER PRE-TRADE RISK CONTROLS WERE NOT TRIGGERED,THEREBY CONTRIBUTING TO THE FIRM'S FAILURE TO DETECT ANDPREVENT THE ENTRY OF ERRONEOUS ORDERS.
WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT IT FAILED TOESTABLISH, DOCUMENT AND MAINTAIN A SYSTEM OF RISK MANAGEMENTCONTROLS AND SUPERVISORY PROCEDURES REASONABLY DESIGNEDTO PREVENT THE ENTRY OF ERRONEOUS ORDERS AND FAILED TOESTABLISH, IMPLEMENT AND MAINTAIN ADEQUATE SUPERVISORYPROCEDURES AND/OR A SYSTEM OF FOLLOW-UP AND REVIEW,INCLUDING WRITTEN SUPERVISORY PROCEDURES, REASONABLYDESIGNED TO ENSURE COMPLIANCE WITH SECURITIES EXCHANGE ACTOF 1934 RULE 15C3-5. THE FINDINGS STATED THAT BECAUSE A DIVIDENDWAS NOT PROPERLY ACCOUNTED FOR BY THE FIRM IN ITS TRADING ANDPRICING SYSTEMS, WHEN THE FIRM'S TRADING MODELS COMMENCEDTRADING ON THE MORNING OF JULY 25, 2012, THEY MISPRICED ACOMPANY'S OPTIONS WITH AN EXPIRATION DATE ON OR AFTER AUGUST16, 2012. WHILE EACH ORDER PLACED AND EXECUTED WAS SUBJECTEDTO THE FIRM'S PRE-TRADE RISK CONTROLS, DUE TO THE FAILURE TOADJUST FOR THE EXPECTED DIVIDEND, ALMOST ALL OF THE COMPANY'SOPTIONS CONTRACTS WITH AUGUST 2012 EXPIRATION DATES WEREEXECUTED AT UNFAVORABLE PRICES, RESULTING IN A LOSS TO THE FIRMOF ALMOST $3.7 MILLION. THE FIRM REQUESTED OBVIOUS ERRORRULINGS FOR ANY MISPRICED COMPANY EXECUTIONS ACROSS ALLEXCHANGES. HOWEVER, WHILE THE FIRM'S EXECUTIONS WERE ATPRICES AWAY FROM THE NATIONAL BEST BID AND OFFER (NBBO), THEVAST MAJORITY OF EXECUTIONS DID NOT MEET THE OBVIOUS ERRORREQUIREMENTS AND ONLY A VERY SMALL NUMBER OF TRADES WEREBROKEN, ADJUSTED OR OTHERWISE UNWOUND BY THE EXCHANGES.WHEN THE FIRM'S REGISTERED OPTIONS PRINCIPAL NOTICED THATCERTAIN TRADING STRATEGIES WERE "LOCKING DOWN" (I.E., PREVENTEDFROM PLACING ADDITIONAL ORDERS UNTIL UNLOCKED BY ANAUTHORIZED RISK MANAGER) DUE TO THE FIRM'S PRE-TRADE RISKCONTROLS, HE BELIEVED THAT THOSE LOCKDOWNS WERE RELATED TOMARKET-DATA ISSUES AND THUS BEGAN MANUALLY RESETTING THESTRATEGIES, THEREBY PERMITTING THE RELEVANT STRATEGY TOCONTINUE PLACING ORDERS SUBJECT TO THE FIRM'S MAXIMUMDISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL, WHICH WAS SETTO $1.00 AT THE TIME. BECAUSE THE REGISTERED OPTIONS PRINCIPALMANUALLY RESET A TOTAL OF 72 LOCKDOWNS (WITHOUT DISABLING THEMAXIMUM DISTANCE FROM THE NBBO PRE-TRADE RISK CONTROL), THEFIRM'S STRATEGIES CONTINUED TO SUBMIT ORDERS IN THE COMPANYTHAT, WHILE STILL SUBJECT TO THE FIRM'S PRE-TRADE RISK CONTROLS,WERE MISPRICED AND WERE ALSO DISADVANTAGEOUS TO THE FIRM. INADDITION, BECAUSE THE FIRM'S PRE-TRADE RISK CONTROLS WEREAPPLIED TO EACH OPTIONS SERIES INDIVIDUALLY RATHER THAN THEFIRM'S AGGREGATE POSITION IN THE UNDERLYING SECURITY, MANY OFTHE FIRM'S OTHER PRE-TRADE RISK CONTROLS WERE NOT TRIGGERED,THEREBY CONTRIBUTING TO THE FIRM'S FAILURE TO DETECT ANDPREVENT THE ENTRY OF ERRONEOUS ORDERS.
Resolution Date: 10/09/2015
Resolution:
Other Sanctions Ordered: UNDERTAKINGS: REVISE THE FIRM'S POLICIES AND PROCEDURES,INCLUDING ITS WRITTEN SUPERVISORY PROCEDURES, TO ESTABLISHAND MAINTAIN ADEQUATE SUPERVISORY PROCEDURES
Sanction Details: THE FIRM WAS CENSURED, FINED, JOINT AND SEVERAL, $60,000, OFWHICH $20,000 SHALL BE PAID TO THE NASDAQ OPTIONS MARKET ANDTHE BALANCE WILL BE PAID TO NYSE ARCA, INC. AND NYSE MKT LLC, ANDUNDERTAKES TO REVISE ITS POLICIES AND PROCEDURES, INCLUDING ITSWRITTEN SUPERVISORY PROCEDURES, TO ESTABLISH AND MAINTAINADEQUATE SUPERVISORY PROCEDURES.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ITS SYSTEM OF RISK MANAGEMENTCONTROLS AND SUPERVISORY PROCEDURES WERE NOT REASONABLYDESIGNED TO PREVENT THE ENTRY OF POTENTIALLY ERRONEOUSORDERS, IN VIOLATION OF RULE 15C3-5(C)(1)(II) OF THE SECURITIES ANDEXCHANGE ACT OF 1934, AS AMENDED, CHAPTER III, SECTION 2(A)(I) OFNOM RULES, AND NASDAQ RULES 2010 AND 2110.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ITS SYSTEM OF RISK MANAGEMENTCONTROLS AND SUPERVISORY PROCEDURES WERE NOT REASONABLYDESIGNED TO PREVENT THE ENTRY OF POTENTIALLY ERRONEOUSORDERS, IN VIOLATION OF RULE 15C3-5(C)(1)(II) OF THE SECURITIES ANDEXCHANGE ACT OF 1934, AS AMENDED, CHAPTER III, SECTION 2(A)(I) OFNOM RULES, AND NASDAQ RULES 2010 AND 2110.
Resolution Date: 10/09/2015
Resolution:
Other Sanctions Ordered:
Sanction Details: $20,000 OF THE FINE IS PAYABLE TO NASDAQ OPTIONS MARKETS LLC.THE REMAINING BALANCE IS TO BE SPLIT BETWEEN NYSE ARCA ANDNYSE MKT (MATTER NOS. 2012033412202 AND 2012033412203). THE FIRMWILL PAY THE $20,000 FINE TO NOM WHEN INVOICED AND AGREES TOREVISE ITS WRITTEN SUPERVISORY PROCEDURES CONCERNING PRE-TRADE RISK CONTROLS.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Allegations: THE FIRM FAILED TO ESTABLISH AND MAINTAIN WRITTEN SUPERVISORYPROCEDURES THAT OUTLINED ITS SUPERVISION TO PREVENT SENDINGORDERS THAT LOCKED OR CROSSED THE MARKET, INCLUDING FAILINGTO IDENTIFY THE NAME OF THE INDIVIDUAL RESPONSIBLE FORSUPERVISING FOR LOCKED/CROSSED RULES AND THE RESPONSIBILITIESOF THAT PERSON. THE FIRM VIOLATED EXCHANGE RULE 748, WHICH ISAPPLICABLE TO MARKET PARTICIPANTS TRADING ON NASDAQ OMX PSXPURSUANT TO PSX RULE 3202.
Allegations: THE FIRM FAILED TO ESTABLISH AND MAINTAIN WRITTEN SUPERVISORYPROCEDURES THAT OUTLINED ITS SUPERVISION TO PREVENT SENDINGORDERS THAT LOCKED OR CROSSED THE MARKET, INCLUDING FAILINGTO IDENTIFY THE NAME OF THE INDIVIDUAL RESPONSIBLE FORSUPERVISING FOR LOCKED/CROSSED RULES AND THE RESPONSIBILITIESOF THAT PERSON. THE FIRM VIOLATED EXCHANGE RULE 748, WHICH ISAPPLICABLE TO MARKET PARTICIPANTS TRADING ON NASDAQ OMX PSXPURSUANT TO PSX RULE 3202.
Resolution Date: 08/19/2015
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM MADE AND ENTERED INTO AN OFFER OF SETTLEMENT,PURSUANT TO EXCHANGE RULE 960.7, SOLELY FOR THE PURPOSES OFTHESE PROCEEDINGS AND TO SETTLE AND CONCLUDE ALL DISCIPLINARYACTIONS BY THE EXCHANGE BASED ON OR ARISING OUT OF THE FACTSHEREINAFTER STIPULATED. THE COMMITTEE CONCURS IN THESANCTIONS CONSENTED TO BY THE FIRM, AND ORDERS THE IMPOSITIONOF THE FOLLOWING SANCTION - A FINE IN THE AMOUNT OF $5,000AGAINST THE FIRM.
Regulator Statement ASSOCIATED CASE NUMBERS: 20120330885/ENFORCEMENT NO. 2015-08
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ITS WRITTEN POLICIES ANDPROCEDURES WERE NOT REASONABLY DESIGNED TO PREVENT THEENTRY OF ORDERS THAT COULD LOCK OR CROSS THE MARKET, INVIOLATION OF NASDAQ OMX PHLX RULE 748 AND NASDAQ OMX PSX RULE3202.
Current Status: Final
Resolution Date: 08/19/2015
Resolution:
Other Sanctions Ordered:
Sanction Details: THE FIRM WILL PAY THE $5,000 FINE WHEN INVOICED.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Sanctions Ordered: Monetary/Fine $5,000.00
Decision
Disclosure 14 of 17
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Reporting Source: Regulator
Allegations: VIRTU FINANCIAL BD LLC ("VIRTU"), AN EXCHANGE TPH ORGANIZATION,WAS CENSURED AND FINED $15,000 FOR FAILING TO QUALIFY ANDREGISTER THREE (3) ASSOCIATED PERSONS AS A PROPRIETARY TRADERPRINCIPAL (TP) WITH THE EXCHANGE IN WEBCRD. (EXCHANGE RULE 3.6A- QUALIFICATION AND REGISTRATION OF TRADING PERMIT HOLDERS ANDASSOCIATED PERSONS)
Allegations: VIRTU FINANCIAL BD LLC ("VIRTU"), AN EXCHANGE TPH ORGANIZATION,WAS CENSURED AND FINED $15,000 FOR FAILING TO QUALIFY ANDREGISTER THREE (3) ASSOCIATED PERSONS AS A PROPRIETARY TRADERPRINCIPAL (TP) WITH THE EXCHANGE IN WEBCRD. (EXCHANGE RULE 3.6A- QUALIFICATION AND REGISTRATION OF TRADING PERMIT HOLDERS ANDASSOCIATED PERSONS)
Initiated By: CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED.
Principal Sanction(s)/ReliefSought:
Civil and Administrative Penalt(ies) /Fine(s)
Date Initiated: 07/07/2015
Docket/Case Number: 15-0071 / 20150459631
Principal Product Type: Options
Other Product Type(s):
Allegations: THE CBOE FILED A COMPLAINT AGAINST VIRTU FINANCIAL BD, LLC("VFBD") FOR ALLEGED VIOLATIONS OF CBOE RULE 3.6A, WHICHREQUIRES ASSOCIATED PERSONS OF A TPH ORGANIZATION TO BEREGISTERED WITH THE CBOE IN THE CATEGORY OF REGISTRATIONAPPROPRIATE TO THE FUNCTION TO BE PERFORMED.
Sanction Details: THE $15,000 FINE WAS PAID ON 7/20/2016
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRM'SSUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOTHE APPLICABLE SECURITIES LAWS AND REGULATIONS, AND THE RULESOF NASDAQ, CONCERNING LOCKED OR CROSSED MARKETS.
Other Sanctions Ordered: UNDERTAKING: REVISE THE FIRM'S WRITTEN SUPERVISORYPROCEDURES.
Sanction Details: THE FIRM WAS FINED $5,000 AND UNDERTAKES TO REVISE ITS WRITTENSUPERVISORY PROCEDURES.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
No
Sanctions Ordered: Monetary/Fine $5,000.00
Acceptance, Waiver & Consent(AWC)
iReporting Source: Firm
Initiated By: NASDAQ STOCK MARKET LLC
Principal Sanction(s)/ReliefSought:
Civil and Administrative Penalt(ies) /Fine(s)
Other Sanction(s)/ReliefSought:
Date Initiated: 07/13/2015
Docket/Case Number: 20120309178-01
Principal Product Type: No Product
Other Product Type(s):
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ITS WRITTEN POLICIES ANDPROCEDURES WERE NOT REASONABLY DESIGNED TO PREVENT THEENTRY OF ORDERS THAT COULD LOCK OR CROSS THE MARKET, INVIOLATION OF NASDAQ RULES 2110 AND 3010.
Current Status: Final
Resolution Date: 07/13/2015
Resolution:
Other Sanctions Ordered: UNDERTAKING: REVISE THE FIRM'S WRITTEN SUPERVISORYPROCEDURES
Other Sanctions Ordered: UNDERTAKING: REVISE THE FIRM'S WRITTEN SUPERVISORYPROCEDURES
Sanction Details: THE FIRM ENHANCED ITS PROCEDURES TO PREVENT THE ENTRY OFORDERS THAT COULD LOCK OR CROSS THE MARKET ON OR BEFOREFEBRUARY 2014 AND WILL PAY THE $5,000 WHEN INVOICED.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Disclosure 16 of 17
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Reporting Source: Regulator
Initiated By: NASDAQ OMX BX, INC.
Principal Sanction(s)/ReliefSought:
Other Sanction(s)/ReliefSought:
Date Initiated: 07/13/2015
Docket/Case Number: 2011029375501
Principal Product Type: No Product
Other Product Type(s):
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT THE FIRM'SSUPERVISORY SYSTEM DID NOT PROVIDE FOR SUPERVISIONREASONABLY DESIGNED TO ACHIEVE COMPLIANCE WITH RESPECT TOTHE APPLICABLE SECURITIES LAWS AND REGULATIONS, AND THE RULESOF THE NASDAQ OMX BX, INC., CONCERNING LOCKED OR CROSSEDMARKETS.
Current Status: Final
Resolution Date: 07/13/2015
Resolution:
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
Other Sanctions Ordered: UNDERTAKING: REVISE THE FIRM'S WRITTEN SUPERVISORYPROCEDURES.
Sanction Details: THE FIRM WAS FINED $5,000 AND UNDERTAKES TO REVISE ITS WRITTENSUPERVISORY PROCEDURES.
Does the order constitute afinal order based onviolations of any laws orregulations that prohibitfraudulent, manipulative, ordeceptive conduct?
No
Sanctions Ordered: Monetary/Fine $5,000.00
iReporting Source: Firm
Initiated By: NASDAQ OMX BX
Principal Sanction(s)/ReliefSought:
Civil and Administrative Penalt(ies) /Fine(s)
Other Sanction(s)/ReliefSought:
Date Initiated: 07/13/2015
Docket/Case Number: 20110293755-01
Principal Product Type: No Product
Other Product Type(s):
Allegations: WITHOUT ADMITTING OR DENYING THE FINDINGS, THE FIRM CONSENTEDTO THE ENTRY OF FINDINGS THAT ITS WRITTEN POLICIES ANDPROCEDURES WERE NOT REASONABLY DESIGNED TO PREVENT THEENTRY OF ORDERS THAT COULD LOCK OR CROSS THE MARKET, INVIOLATION OF NASDAQ OMX BX RULES 2110 AND 3010.
Current Status: Final
Resolution Date: 07/13/2015
Resolution:
Other Sanctions Ordered: UNDERTAKING: REVISE THE FIRM'S WRITTEN SUPERVISORYPROCEDURES
Sanction Details: THE FIRM ENHANCED ITS PROCEDURES TO PREVENT THE ENTRY OFORDERS THAT COULD LOCK OR CROSS THE MARKET ON OR BEFOREFEBRUARY 2014 AND WILL PAY THE $5,000 WHEN INVOICED.
Sanction Details: THE FIRM ENHANCED ITS PROCEDURES TO PREVENT THE ENTRY OFORDERS THAT COULD LOCK OR CROSS THE MARKET ON OR BEFOREFEBRUARY 2014 AND WILL PAY THE $5,000 WHEN INVOICED.
Firm Statement THE FIRM CONSENTED TO THE SANCTIONS AND TO THE ENTRY OFFINDINGS FOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARYPROCEEDING, WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT,AND WITHOUT ADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGSREFERRED TO THEREIN.
Disclosure 17 of 17
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Reporting Source: Regulator
Initiated By: NYSE ARCA, INC.
Principal Sanction(s)/ReliefSought:
Other
Other Sanction(s)/ReliefSought:
N/A
Date Initiated: 03/31/2014
Docket/Case Number: 2011027866901
Principal Product Type: Equity Listed (Common & Preferred Stock)
Other Product Type(s):
Allegations: RULES 204(A)(1), 204(B) OF REGULATION SHO; NYSE ARCA EQUITIES RULE6.18: THE OFFER OF SETTLEMENT AND CONSENT WAS SUBMITTED FORTHE SOLE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING,WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT, AND WITHOUTADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERRED TOTHEREIN. THE HEARING OFFICER ACCEPTS THE OFFER OF SETTLEMENTAND CONSENT AND ISSUES THIS DECISION IN ACCORDANCE WITH NYSEARCA EQUITIES RULES. THE FIRM FAILED TO TIMELY CLOSE OUT FAIL-TO-DELIVER POSITIONS AT A REGISTERED CLEARING AGENCY IN EQUITYSECURITIES RESULTING FROM A PROPRIETARY LONG SALE. THE FIRMEFFECTED PROPRIETARY SHORT SALES IN SECURITIES FOR WHICH ITHAD AN OPEN FAIL-TO-DELIVER POSITION WITHOUT FIRST BORROWINGSUCH SECURITIES OR ENTERING INTO A BONA FIDE ARRANGEMENT TOBORROW THE SECURITIES. THE FIRM FAILED TO ESTABLISH ANDMAINTAIN A SYSTEM REASONABLY DESIGNED TO ENSURE COMPLIANCEWITH RULE 204 OF REGULATION SHO.
Principal Product Type: Equity Listed (Common & Preferred Stock)
Other Product Type(s):
Allegations: RULES 204(A)(1), 204(B) OF REGULATION SHO; NYSE ARCA EQUITIESRULE6.18:THE OFFER OF SETTLEMENT AND CONSENT WAS SUBMITTEDFOR THE SOLE PURPOSE OF SETTLING THIS DISCIPLINARY PROCEEDING,WITHOUT ADJUDICATION OF ANY ISSUES OF LAW OR FACT, AND WITHOUTADMITTING OR DENYING ANY ALLEGATIONS OR FINDINGS REFERRED TOTHEREIN. THE HEARING OFFICER ACCEPTED THE OFFER OF SETTLEMENTAND CONSENT AND ISSUED THIS DECISION IN ACCORDANCE WITH NYSEARCA EQUITIES RULES. THE FIRM FAILED TO TIMELY CLOSE-OUT FAIL-TO-DELIVER POSITIONS AT A REGISTERED CLEARING AGENCY IN EQUITYSECURITIES RESULTING FROM A PROPRIETARY LONG SALE. THE FIRMEFFECTED PROPRIETARY SHORT SALES IN SECURITIES FOR WHICH ITHAD AN OPEN FAIL-TO-DELIVER POSITION WITHOUT FIRST BORROWINGSUCH SECURITIES OR ENTERING INTO A BONA FIDE ARRANGEMENT TOBORROW THE SECURITIES. THE FIRM FAILED TO ESTABLISH AN MAINTAINA SYSTEM REASONABLY DESIGNED TO ENSURE COMPLIANCE WITH RULE204 OF REGULATION SHO.
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