Firm Settles Nasdaq Charges for Market Maker Quoting Deficiencies

A firm settled separate charges with The Nasdaq Options Market LLC ("NOM") and The Nasdaq Stock Market LLC ("NSM") for failing to comply with market maker quoting obligations and for related supervisory failures.

In two AWCs, (see here and here), Nasdaq found that the firm, among other things:

• exceeded the maximum allowable quote spreads an aggregate of 69,659,867 times between October 1, 2022, and December 31, 2022, due to (i) the firm "misconfigur[ing] its quoting system to submit quotes at the firm's 'global width,' which was wider than the allowable quote spread on NOM"; and (ii) a failure "to reconfigure systems after a NOM Options Regulatory Alert that removed certain quote spread parameter relief for options classes in which the firm was appointed;"
• failed to enter and maintain an attributable two-sided quotation on a continuous basis during regular market hours in 186 instances between July 3, 2023, and December 31, 2023, because its quotations "did not have the 'Display' field populated with an 'A' for 'Attributable'"; and failed to maintain an attributable two-sided quotation in 11 additional instances during the same July 2023–December 2023 period due to technical issues impacting its quotations;
• failed to establish and maintain a supervisory system reasonably designed or configured to properly identify options quote spread rule violations; and
• utilized equity surveillance systems that were not designed to identify whether its quoting was attributable, thereby failing to detect the 186 instances where it missed its quoting obligations.

The exchanges found that the firm violated NOM Rule Options 2 ("Options 2 Options Market Participants"), Nasdaq Rule Equity 2 ("Market Participants"), and both exchanges' Rules General 9 sections 1(a) ("General Standards") and 20(a) ("Supervision"). 

To settle the charges, the firm agreed to (i) a censure in both matters, (ii) pay a $19,425 fine to NOM ("resolved simultaneously with similar matters for a total fine of $92,500"), and (iii) pay a $35,000 fine to NSM.