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NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 2019061058202
TO:Nasdaq Phlx LLC
c/o Department of Enforcement
Financ02ial Industry Regulatory Authority (“FINRA”)

RE:

CTC, LLC, Respondent
Member Firm
CRD No. 44597

Pursuant to Rule 9216 of Nasdaq Phlx LLC (“Phlx”) Code of Procedure, 1 CTC, LLC (the “firm”
or “Respondent”) submits this Letter of Acceptance, Waiver and Consent (“AWC”) for thepurpose of proposing a settlement of the alleged rule violations described below. This AWC issubmitted on the condition that, if accepted, Phlx will not bring any future actions against theRespondent alleging violations based on the same factual findings described herein.
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:
BACKGROUND
CTC became a Phlx member in October 2005. CTC is headquartered in Chicago,Illinois. The firm engages in, among other things, options market making and related
hedging activity in equity securities. CTC has no relevant disciplinary history.
SUMMARY
This matter arises from CTC’s self-identification and disclosure of order marking
deficiencies during the period of October 13, 2017 through August 1, 2019 (the “reviewperiod”). The Financial Industry Regulatory Authority, Inc.’s (“FINRA”) MarketRegulation Department conducted a further review of the firm’s compliance with Rule200(g) of Regulation SHO of the Securities Exchange Act of 1934 as part of its Tradingand Financial Compliance Examinations (“TFCE”) 2019 Options Cycle Examination on
behalf of Phlx and other options exchanges. Based on the foregoing examination, CTC

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Series 9000 of The Nasdaq Stock Market LLC Rules are incorporated by reference into Phlx Rule General 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.

STAR No. 20190610582 (DJP)       violated Rule 200(g) of Regulation SHO of the Securities Exchange Act of 1934 (“RegSHO”) by incorrectly marking 119,787 sell orders as long or short. 2FACTS AND VIOLATIVE CONDUCT
1. Rule 200(g) requires a broker or dealer to mark all sell orders of any equity security
as “long,” “short,” or “short exempt.” The Rule provides that an order to sell shall bemarked "long" only if the seller is deemed to own the security being sold as detailed
in the Rule and either: (i) the security to be delivered is in the physical possession orcontrol of the broker or dealer; or (ii) it is reasonably expected that the security will
be in the physical possession or control of the broker or dealer no later than thesettlement of the transaction.
2. From October 13, 2017 through May 20, 2018, the firm mismarked 1,737 long saleorders as short due to four intermittent system issues, which the firm self-identified
and addressed. From May 16, 2018 through August 1, 2019, the firm also mismarked
118,050 short sale orders as long due to two programming errors in its proprietary
equity hedging system. The firm self-identified these programming issues in late July
2019 and implemented corrective programming to its equity hedging system as ofAugust 2, 2019.
3. In total, during the Relevant Period, CTC incorrectly marked 119,787 sell orders aslong or short. This conduct constitutes separate and distinct violations of Rule200(g).
OTHER FACTORS
4. In determining to resolve this matter on the basis set forth herein, Phlx took into
consideration the following: (i) the firm self-reported the violations prior to detection
or initiation of an investigation by FINRA or other regulators; (ii) after self-reporting,the firm promptly conducted follow-up investigation and provided FINRA staff withinformation quantifying the number of violations and specifying root causes of ordermarking violations, which was of substantial assistance to Market Regulation staff;and (iii) the prompt remedial measures implemented by the firm.
B.

Respondent also consents to the imposition of the following sanctions:
A censure and a total fine of $95,000 to be paid jointly to Phlx, Cboe, C2, BZX,ISE, and NYSE American, of which $17,500 is allocated to Phlx.
Acceptance of this AWC is conditional upon acceptance of parallel settlementagreements in related matters between the firm and Cboe, C2, BZX, ISE, and NYSE
American.

2 Related disciplinary actions on behalf of Cboe Exchange, Inc. (“Cboe”), C2 Exchange Inc. (“C2”), Cboe BZX

Exchange Inc. (“BZX”), Nasdaq ISE, LLC (“ISE”), and NYSE American LLC (“NYSE American”) are being taken
concurrently in conjunction with this matter.

2       Respondent agrees to pay the monetary sanction(s) in accordance with its executed
payment form.
Respondent specifically and voluntarily waives any right to claim that it is unable to pay,
now or at any time hereafter, the monetary sanction(s) imposed in this matter.
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

3       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; andC.

If accepted:

D.

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 which
Phlx 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.

4       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 that
no 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.
_____________
Date

_________________________________
CTC, LLC
Respondent

By: __________________________________________
Date

Print Name: Melvin Williams Jr
Title: Chief Legal Officer
Accepted by Phlx: 

_________________
Date____________________________________David J. Prieto
Senior Counsel
Department of Enforcement
Signed on behalf of Phlx, by delegatedauthority from the Director of ODA

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