Market-Maker Fined for Exceeding Option Position Limits

A market-maker settled charges with NYSE American and NYSE Arca (see here and here) for exceeding option position limits.

In separate Letters of Acceptance, Waiver, and Consent, NYSE American and NYSE Arca (the "Exchanges") said that the market-maker attempted to rely on the "Delta Hedge Exemption," which provides relief from position limits for an equity option position that is delta neutral. The Exchanges stated that any options position of a firm using the exemption that is not delta hedged is still subject to position limits. The Exchanges found that the market-maker exceeded the position limit in certain positions that were not delta neutral. The Exchanges stated that the market-maker identified and corrected the position limit overages.

As a result, the Exchanges alleged that the market-maker violated NYSE American Rule 904 ("Position Limits") and NYSE Arca Rule 6.8-O ("Position Limits").

To settle the charges, the market-maker agreed to (i) a censure and (ii) pay an $8,000 fine to each exchange which is "resolved simultaneously" for similar matters with other exchanges for a total fine of $80,000.