Cboe C2 Fines Clearing Firm $850,000 Over Options-Reporting Errors

A registered broker-dealer settled Cboe C2 Exchange charges for failing to accurately report large options positions to the regulatory surveillance system in more than 2.7 million instances over more than a decade.

Cboe C2 found that from January 2012 through late 2024, the firm committed at least 2,761,000 reporting failures across four categories: (i) 2,684,533 instances of failing to update its clearing member number on Acting in Concert files after a portfolio margin account migration, leaving some accounts without required AIC information; (ii) 58,684 instances of over-reported positions because customers mismarked expiration-date orders as opening rather than closing; (iii) 7,152 instances of incorrect effective dates caused by a third-party vendor issue; and (iv) 10,670 positions reported with incorrect foreign postal codes.

These failures violated Cboe C2 Rules 4.13(a) and 8.43(a), which require firms to report large options positions used to surveil for potentially manipulative conduct including market cornering and front-running.

Cboe C2 also found that from October 2017 through the settlement date, the firm failed to maintain written supervisory procedures reasonably designed to detect LOPR violations. Although procedures required daily review of LOPR reports and exception files, the procedures did not instruct reviewers how to identify or resolve discrepancies, nor designate which departments were responsible for corrective action.

The firm is subject to a $850,000 fine, a censure and is required to certify in writing within 90 days that the firm has remediated the identified issues and implemented a compliant supervisory system.