Notice of Disciplinary Action against Consolidated Trading
LLC, a Member Organization
To:

Members, Member Organizations, Participants and Participant Organizations

From:

John C. Pickford, Assistant General Counsel, NASDAQ OMX PHLXSM

DATE:June 18, 2015

FINRA Matter No. 20120321863 (includes Matter Nos. 20100219318 and20140399289)
Enforcement No. 2015-02
On June 8, 2015, the Business Conduct Committee (the “Committee”) issued a disciplinary
decision against Consolidated Trading LLC (“Consolidated” or the “Firm”), a member
organization of the Exchange. In response to a Statement of Charges issued in this action,
Consolidated submitted an Offer of Settlement, Stipulation to Findings and Consent toSanctions (“Offer”). Solely to settle this proceeding, and without admitting or denying thecharges, Consolidated stipulated to findings that during three examination review
periods—March 2010 through May 2010 (the “2010 review period”), July 2012 throughSeptember 2012 (the “2012 review period”), and February 1–28, 2014 (the “2014 reviewperiod”)— Consolidated violated certain federal securities laws and regulations andExchange rules.
Specifically, during the 2010, 2012 and 2014 review periods, out of a sample of orders
reviewed, Consolidated marked 44 long sale orders as short in violation of Rule 200(g) ofRegulation SHO, 17 C.F.R. § 242.200(g), under the Securities Exchange Act of 1934 (the“Exchange Act”). Additionally, in the 2014 review period, Consolidated violated Exchange
Act Rule 17a-3(a)(1) in four instances in which its trading blotter was inaccurate, asshown by inconsistencies between the blotter and end-of-day positions according to its
clearing firm. Finally, during the 2010, 2012 and 2014 review periods, Consolidated
violated Exchange rules 748(b) and (g), which was later re-designated as Rule 748(h), bygenerally failing to establish reasonable written supervisory procedures, in that theprocedures failed to identify specific reviews to be conducted to ensure compliance withcertain Exchange rules and federal securities laws. The Firm’s procedures were deficient in
multiple areas, including the following:
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Order marking requirements
The “circuit breaker” rule
Just and equitable principles of trade and acts detrimental to the Exchange
The Insider Trading and Securities Fraud Enforcement Act and the prevention of
the misuse of material nonpublic information
Obligations of market makers and member organizations
Position limits
Exercise limits
Liquidation of positionsLimit on uncovered short positions
Restrictions on Exchange options transactions and exercises
On-floor trading and quoting obligations and restrictions applicable to Specialists
and registered Options Traders
Exercise of equity options contracts
The filing of trade information
Obvious and catastrophic errors

The Offer submitted by Consolidated was accepted by the Committee and was the basis ofits Decision. The Committee found that Consolidated had violated Rule 200(g) ofRegulation SHO, Exchange Act Rule 17a-3(a)(1), and PHLX Rule 748. The Committee
concurred in the sanctions consented to by Consolidated, and ordered the imposition ofthe following sanctions: (i) a censure; (ii) a fine of $95,000, of which $20,000 shall be
paid to the Exchange; and (iii) an undertaking to revise its written supervisory procedureswith respect to the areas identified above. Consolidated will pay the balance of its fine toInternational Securities Exchange LLC and NYSE Regulation, Inc.
For more information, contact:
John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLX, at +1 215 496 5273

 Copyright 2009 The NASDAQ OMX Group, Inc. All Rights Reserved.

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