Cboe Imposes Sanctions on Broker-Dealer for Trading on Undisclosed Information

The Cboe C2 Exchange, Inc. (or "C2") imposed sanctions against a broker-dealer for trading on two customer orders prior to disclosing them to the trading crowd.

In a Letter of Consent, C2 alleged that after receiving a customer order to purchase 1,250 put options on an exchange-traded fund, but before disclosing the order to the trading crowd, a trader of the broker-dealer purchased 1,082 put options on the fund for one of the broker-dealer's own accounts, in violation of C2 Rules 4.1 ("Just and Equitable Principles of Trade") and 6.55 ("Trading on Knowledge of Imminent Undisclosed Solicited Transaction"). Additionally, C2 claimed that, in a separate instance, the broker-dealer also violated C2 Rules 4.1 and 6.55 by pre-hedging its expected facilitation of a customer order prior to the disclosure of that order to the trading crowd.

To settle the charges, the broker-dealer agreed to a (i) censure, (ii) $52,140 fine and (iii) disgorgement of $12,031. The total fine the broker-dealer consented to is $325,000, with a disgorgement of $40,469, the remainder of which is to be paid to Nasdaq Options Market, LLC, Nasdaq ISE, LLC, Nasdaq BX Inc., Nasdaq GEMX, LLC, NYSE Arca, Inc., NYSE American LLC, Cboe Exchange, Inc., BOX Exchange, LLC, Miami International Securities Exchange and MIAX PEARL, LLC.