DocuSign Envelope ID: 6BDC1761-B32F-4896-BA12-16FFB08B2D2B

NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 20180580170-06
TO:Nasdaq Phlx LLC
c/o Department of Enforcement
Financial Industry Regulatory Authority (“FINRA”)

RE:

Global Execution Brokers, LP, Respondent
Member Firm
CRD No. 126407

Pursuant to Rule 9216 of Nasdaq Phlx LLC (“Phlx”) Code of Procedure,1 Global ExecutionBrokers, LP (“GEB” or the “Firm”) submits this Letter of Acceptance, Waiver and Consent(“AWC”) for the purpose of proposing a settlement of the alleged rule violations described
below. This AWC is submitted on the condition that, if accepted, Phlx will not bring any future
actions against the Respondent alleging violations based on the same factual findings describedherein.
I.
ACCEPTANCE AND CONSENT
A.

Respondent hereby accepts and consents, without admitting or denying the findings, andsolely for the purposes of this proceeding and any other proceeding brought by or on
behalf of Phlx, or to which Phlx is a party, prior to a hearing and without an adjudicationof any issue of law or fact, to the entry of the following findings by Phlx:
BACKGROUNDGEB has been a member of Phlx since April 2008. GEB is a broker-dealer registeredwith the Securities and Exchange Commission (“SEC”) located in Bala Cynwyd,
Pennsylvania. The Firm has 28 registered representatives and no branches. GEB
operates solely as an agency broker for other broker-dealers. The Firm has no relevant
disciplinary history.
SUMMARY
This matter arose from an investigation conducted by FINRA relating to GEB’s
execution of an options order on March 21, 2018. The investigation found that fromMarch 2018 through November 2021 (the “Relevant Period”), GEB violated Rule 15c3-5of the Securities Exchange Act of 1934 by failing to establish, document, and maintain asystem of risk management controls reasonably designed to prevent the entry oferroneous orders. During the same period, GEB violated Phlx Rules 748 and 707 (for1Series 9000 of The Nasdaq Stock Market LLC (“Nasdaq”) Rules are incorporated by reference into Phlx RuleGeneral 5, Section 3, and are thus Phlx Rules and thereby applicable to Phlx members, member organizations,persons associated with member organizations, and other persons subject to the Exchange’s jurisdiction.

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conduct prior to February 3, 2020), and General 9, Sections 20 and 1(c) (for conduct on
and after February 3, 2020)2 by failing to establish and maintain a system of supervisory
controls, including written procedures, reasonably designed to achieve compliance with(1) Exchange Act Rule 15c3-5 and (2) Phlx rules relating to the post-trade review ofpotentially erroneous orders.
FACTS AND VIOLATIVE CONDUCTApplicable Rules
1. Exchange Act Rule 15c3-5(b) requires a broker-dealer with market access to“establish, document, and maintain a system of risk management controls andsupervisory procedures reasonably designed to manage the financial, regulatory,
and other risks of this business activity.”3
2. Exchange Act Rule 15c3-5(c)(1)(ii) specifically requires that a broker-dealer’ssystem of risk management controls and supervisory procedures must be
reasonably designed to “[p]revent the entry of erroneous orders, by rejecting
orders that exceed appropriate price or size parameters, on an order-by-order basis
or over a short period of time, or that indicate duplicative orders.” In the Rule’s
adopting release, the SEC provided as an example of a reasonable control: “asystem-driven, pre-trade control designed to reject orders that are not reasonablyrelated to the quoted price of the security.”4
3. Phlx Rule 748, and subsequently General 9, Section 20, requires members to“establish, maintain, and enforce written supervisory procedures, and a system forapplying such procedures, to supervise the types of business(es) in which themember or member organization engages in and to supervise the activities of all
registered representatives, employees, and associated persons. The written
supervisory procedures and the system for applying such procedures shallreasonably be designed to prevent and detect, insofar as practicable, violations of
the applicable securities laws and regulations, including the By-Laws and Rulesof the Exchange.”
4. Phlx Rule 707, and subsequently General 9, Section 1(c), provides that members“shall not engage in conduct inconsistent with just and equitable principles oftrade.”2

As of February 3, 2020, Phlx Rule 748 was renumbered to General 9, Section 20, and Phlx Rule 707 wasrenumbered to General 9, Section 1(c).
3GEB is subject to Exchange Act Rule 15c3-5 because it is a broker with market access to Phlx as well as otheroption exchanges. The Rule defines market access as “[a]ccess to trading in securities on an exchange or alternative
trading system as a result of being a member or subscriber of the exchange or alternative trading system,respectively.”
4Risk Management Controls for Brokers or Dealers with Market Access, SEC Release No. 34-63241, at 11(November 3, 2010).

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DocuSign Envelope ID: 6BDC1761-B32F-4896-BA12-16FFB08B2D2BFacts
5. On March 21, 2018, at 3:58:27 p.m., GEB received a market order to purchase5,000 call option contracts in ABC5 (the “Order”) on behalf of one of its brokerdealer clients.
6. The Order did not breach the pre-order entry market access risk controls that theFirm had in place for its broker dealer-client in March 2018. The Order, however,
was automatically routed to an options exchange, whereupon it received multiple
partial executions at increasing price levels until the exchange rejected back toGEB the unfilled balance, which was then automatically routed to anotherexchange. The next exchange likewise executed the Order at increasing pricelevels until it likewise rejected back to GEB the unfilled balance. The Order wasagain automatically routed to another exchange, and this partial execution andrejection process continued across multiple exchanges until one exchange posted
the unfilled balance as a bid, which was executed at 3:59:49 p.m., thereby
completing the order. This automated activity resulted in an aggregate of nearly
500 transactions (collectively, the “Trade”) and an overall price increase ofroughly 312%—from the first execution price of $12.39 to $38.70. The Tradewas executed across 15 option exchanges, including Phlx.
7. At 3:59 p.m. and 4:00 p.m., GEB’s systems generated “Possible Bad Fill” emails
alerting the GEB client service desk to potential execution quality issues for theTrade. This alert is generated when, among other things, partial executions of amarket order are effected at prices that are a designated margin away from thequoted market at the time the order was received.
8. Although the balance of the Order was rejected by multiple exchanges following
their respective partial executions, the Firm’s order management system did not
maintain a control recognizing this fact and kept re-entering the Order until it wascompletely filled.
9. At around 4:13 p.m., GEB’s broker-dealer client advised GEB’s client service
desk that the customer had mistakenly placed the Order and that “[h]e is looking
to see if he can get any help out of it at all.”
10. At that time, the relevant exchanges, including Phlx, permitted broker-dealers torequest one of two types of relief in response to an erroneous order—a brokerdealer could request review of the trade as an “Obvious Error” or “CatastrophicError.” If the exchanges deemed a transaction an Obvious Error, then the trade
could be busted. Alternatively, if the exchanges deemed a transaction a
Catastrophic Error, the relief was an adjustment of the execution price (and not a5A generic identifier has been used in place of the name of the relevant option series.

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bust of the trade).6
11. The relevant exchanges, including Phlx, required that requests for Obvious Error
review be submitted within 30 minutes of the trade’s execution. The deadline fora Catastrophic Error review was longer—here, GEB had until 8:30 a.m. on thefollowing trading day to request such a review.
12. Only one member of GEB’s client service desk remained after 4:00 p.m. onMarch 21, 2018, as all others left the office due to a severe snowstorm. At oraround the time that GEB’s broker-dealer client alerted GEB to the potentiallyerroneous trade, GEB’s client service desk representative was aware that one of
the counterparties to the Trade was a GEB affiliate.
13. GEB’s client service representative had until around 4:29 p.m. to request Obvious
Error reviews of the Trade.
14. At that time, and throughout the Relevant Period, GEB had no formal training,procedures, or other guidance regarding how to handle an erroneous order review
when a GEB affiliate was a counterparty to such transaction, or any written
supervisory procedure to review for the proper handling of potentially erroneoustransactions.
15. On March 21, 2018, with the 30-minute deadline approaching, the GEB
representative did not attempt to contact his supervisor for assistance. Instead, hesought guidance from an on-site risk manager who worked for the affiliate
16. Ultimately, GEB did not submit the Trade for review as an Obvious Error within
the 30-minute deadline. At around 4:49 p.m., GEB began filing Catastrophic
Error review requests with the relevant exchanges.7
17. In response to GEB’s Catastrophic Error submission, the relevant exchanges
adjusted the execution prices on 3,864 contracts of the Trade to a price of $21.85.8
Violations of Exchange Act Rule 15c3-5, Phlx Rules 748 and 707, and General 9, Sections 20and 1(c)18. During the Relevant Period, GEB did not establish, document, and maintain asystem of risk management controls and supervisory procedures reasonably
designed to prevent the entry of erroneous orders. As set forth above, by allowing
6A transaction determined to be a Catastrophic Error could be busted if the adjusted execution price was higher (forbuy transactions) or lower (for sell transactions) than the customer’s limit price.
7

Among the circumstances involved were that the Trade involved a significant number of individual transactions(almost 500 executions across 15 options exchanges) and the reduction of human resources due to a severe
snowstorm that left only one client service desk representative available to review the Trade and assess whether thetransactions qualified for erroneous order relief.
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GEB subsequently contributed to a settlement between its broker-dealer client and the retail customer relating tothe Trade.

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the Order to be re-submitted a number of times after being rejected by multiple
exchanges, the Firm’s market access controls were not reasonably designed toprevent the entry of erroneous options market orders.
19. As a result, GEB violated Exchange Act Rules 15c3-5(b) and 15c3-5(c)(1)(ii),and Phlx Rules 748 and 707 (for conduct prior to February 3, 2020), and General
9, Sections 20 and 1(c) (for conduct on and after February 3, 2020)..
20. During the Relevant Period, GEB also failed to establish, maintain, enforce, andkeep current a system of supervisory controls reasonably designed to supervise
the Firm’s client service desk and the process for reviewing potentially erroneoustransactions. As set forth above, GEB did not have formal training, procedures,or other guidance regarding how to handle an erroneous order review when aGEB affiliate was a counterparty to such transaction, or any written supervisory
procedure to review for the proper handling of potentially erroneous transactions.
21. As a result, GEB violated Phlx Rules 748 and 707 (for conduct prior to February
3, 2020), and General 9, Sections 20 and 1(c) (for conduct on and after February
3, 2020).
B.

Respondent also consents to the imposition of the following sanctions:
1. Censure;
2. A total fine in the amount of $150,000 ($10,000 payable to Phlx);9 and3. An undertaking requiring that GEB will provide a certification that it has developedand implemented controls and procedures reasonably designed to address thedeficiencies described above. Within 60 calendar days of the notice of acceptance of
this AWC, a registered principal of the firm shall submit to Compliance Assistant,
FINRA Department of Enforcement, 15200 Omega Drive, Third Floor, Rockville,
MD 20850, a signed, dated letter, or an email from a work-related account of theregistered principal to EnforcementNotice@FINRA.org, providing the following
information: (i) a reference to this matter; and (ii) the above-referenced certification.
Respondent agrees to pay the monetary sanction in accordance with its executed payment
form. Respondent agrees to pay the monetary sanction upon notice that this AWC has
been accepted and that such payment is due and payable.
Respondent specifically and voluntarily waives any right to claim that it is unable to pay,
now or at any time hereafter, the monetary sanction imposed in this matter.

9 The remainder of the fine shall be allocated to Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,Nasdaq Options Market LLC, Nasdaq BX, LLC, NYSE American LLC, NYSE Arca, Inc., Cboe C2 Exchange, Inc.,
Cboe Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe BZX Exchange, Inc., BOX Exchange LLC, the Miami
International Securities Exchange, LLC, and MIAX PEARL, LLC for similar violations.

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The sanctions imposed herein shall be effective on a date set by FINRA staff.
II.
WAIVER OF PROCEDURAL RIGHTS
Respondent specifically and voluntarily waives the following rights granted under Phlx’s Codeof Procedure:A.

To have a Formal Complaint issued specifying the allegations against the Firm;

B.

To be notified of the Formal Complaint and have the opportunity to answer theallegations in writing;C.

To defend against the allegations in a disciplinary hearing before a hearing panel,to have a written record of the hearing made and to have a written decision issued;
andD.

To appeal any such decision to the Exchange Review Council and then to the U.S.
Securities and Exchange Commission and a U.S. Court of Appeals.

Further, Respondent specifically and voluntarily waives any right to claim bias or prejudgmentof the Chief Regulatory Officer, the Exchange Review Council, or any member of the Exchange
Review Council, in connection with such person’s or body’s participation in discussions
regarding the terms and conditions of this AWC, or other consideration of this AWC, including
acceptance or rejection of this AWC.
Respondent further specifically and voluntarily waives any right to claim that a person violated
the ex parte prohibitions of Rule 9143 or the separation of functions prohibitions of Rule 9144,
in connection with such person’s or body’s participation in discussions regarding the terms andconditions of this AWC, or other consideration of this AWC, including its acceptance orrejection.
III.
OTHER MATTERS
Respondent understands that:A.

Submission of this AWC is voluntary and will not resolve this matter unless anduntil it has been reviewed and accepted by FINRA’s Department of Enforcement
and the Exchange Review Council, the Review Subcommittee, or the Office ofDisciplinary Affairs (“ODA”), pursuant to Phlx Rule 9216;

B.

If this AWC is not accepted, its submission will not be used as evidence to prove
any of the allegations against the Respondent; and6

DocuSign Envelope ID: 6BDC1761-B32F-4896-BA12-16FFB08B2D2B

C.

D.

If accepted:
1.

This AWC will become part of the Respondent’s permanent disciplinary
record and may be considered in any future actions brought by Phlx or any
other regulator against the Respondent;

2.

Phlx may release this AWC or make a public announcement concerning
this agreement and the subject matter thereof in accordance with Phlx
Rule 8310 and IM-8310-3; and3.

Respondent may not take any action or make or permit to be made any
public statement, including in regulatory filings or otherwise, denying,directly or indirectly, any finding in this AWC or create the impressionthat the AWC is without factual basis. Respondent may not take any
position in any proceeding brought by or on behalf of Phlx, or to whichPhlx is a party, that is inconsistent with any part of this AWC. Nothing inthis provision affects the Respondent’s right to take legal or factual
positions in litigation or other legal proceedings in which Phlx is not aparty.

Respondent may attach a Corrective Action Statement to this AWC that is astatement of demonstrable corrective steps taken to prevent future misconduct.
Respondent understands that it may not deny the charges or make any statementthat is inconsistent with the AWC in this Statement. This Statement does notconstitute factual or legal findings by Phlx, nor does it reflect the views of Phlx orits staff.

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The undersigned, on behalf of the Firm, certifies that a person duly authorized to act on its behalf
has read and understands all of the provisions of this AWC and has been given a full opportunity
to ask questions about it; that the Firm has agreed to the AWC’s provisions voluntarily; and thatno offer, threat, inducement, or promise of any kind, other than the terms set forth herein and theprospect of avoiding the issuance of a Complaint, has been made to induce the Firm to submit it.

September 22, 2022____________________
Date

Global Execution Brokers, LPRespondent

By: ______________________
Brian Sopinsky

Name: ____________________
Assistant Secretary

Title: _____________________
Reviewed by:_______________________
Michael D. WolkCounsel for RespondentSidley Austin LLP
1501 K Street, N.W.
Washington, DC 20005

Accepted by Phlx:
September 23, 2022_________________
Date____________________________________
Jeffery Ding
CounselDepartment of Enforcement
Signed on behalf of Phlx, by delegatedauthority from the Director of ODA

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