NASDAQ ISE, LLC
LETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 2022.03.0378
TO:Nasdaq ISE, LLC
Nasdaq ISE Enforcement Department

RE:J.P. Morgan Securities LLC
Member Firm
CRDNo. 79

Pursuant to Rule 9216 of the Nasdaq ISE, LLC ("ISE") Code of Procedure, 1 J.P. Morgan
Securities LLC (the "Firm," "JPM," or "Respondent") submits this Letter of Acceptance, Waiverand Consent ("AWC") for the purpose of proposing a settlement of the alleged rule violations
described below. This A WC is submitted on the condition that, if accepted, ISE will not bringany future actions against the Respondent alleging violations based on the same factual findings
described herein.

ACCEPTANCE AND CONSENTA.

The Firm 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 ISE, or to which ISE is a party, prior to a hearing and without an adjudication of
any issue of law or fact, to the entry of the following findings by ISE:BACKGROUND
The Firm became a member ofISE on May 1, 2000. The Firm's registration remains ineffect. JPM, a wholly-owned subsidiary of JPMorgan Chase & Co., is a Delaware
limited liability company, headquartered in New York, New York. Among otherservices, JPM acts an agency broker-dealer and options market maker.
On November 8, 2017, the Firm was censured and fined $25,000 by NYSE Arca, Inc. for
one instance of anticipatory hedging in violation of NYSE Arca Options Rule 6.49(b). 2

SUMMARY
Between August 2019 and October 2022 (the "Relevant Period"), on three occasions,
JPM improperly hedged its anticipated facilitation of customer orders prior to disclosure
to the trading crowd of all material terms and conditions of the customer order, inseparate and distinct violations ofISE Rule Options 9, Section 1, Supplemental Material
1 Series 9000 of The Nasdaq Stock Market, LLC ("Nasdaq") Rules are incorporated by reference into the Nasdaq

ISE Rules General 5, Section 3, and are thus Nasdaq ISE Rules and thereby applicable to Nasdaq ISE Members,
Associated Persons, and other persons subject to Nasdaq ISE's jurisdiction.
2NYSE Arca, Inc. Matter No. 2017-03-00042.

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.02. Further, JPM's supervisory system was not reasonably designed to assurecompliance with TSE Rule Options 9, Section 1, Supplemental Material .02 because oftwo deficiencies that prevented the Firm from identifying the transactions at issue.
Accordingly, JPM also violated ISE Rule Options 9, Sections 1 and 2.
FACTS AND VIOLATIVE CONDUCT1.

ISE Rule Options 9, Section 1 provides that "No Member shall engage in acts orpractices inconsistent with just and equitable principles of trade. Persons
associated with Members shall have the same duties and obligations as Members
under the Rules of this Options 9."2.

TSE Rule Options 9, Section 1.02 makes it clear that "[i]t may be considered
conduct inconsistent with just and equitable principles of trade for any person
associated with a Member who has knowledge of all material terms andconditions of: (i) an order and a solicited order, (ii) an order being facilitated, or(iii) orders being crossed; the execution of which are imminent, to enter, based onsuch knowledge, an order to buy or sell an option for the same underlying security
as any option that is the subject of the order, or an order to buy or sell the security
underlying such class, or an order to buy or sell any related instrument until (i) theterms of the order and any changes in the terms of the order of which the person
associated with the Member has knowledge are disclosed to the trading crowd, or(ii) the trade can no longer reasonably be considered imminent in view of thepassage oftime since the order was received. The terms of an order are"disclosed" to the trading crowd on the Exchange when the order is entered into
the System, the Facilitation or Solicited Order Mechanisms."
Anticipatory Hedging Violations

3.

On August 2, 2019, October 21, 2020, and October 14, 2022, JPM traders, having
knowledge of the material terms and conditions of a customer options order,
effected improper hedging transactions prior to the terms and conditions of thecustomer options orders being disclosed.

August 2, 20194.

On August 2, 2019, a JPM trader ("JPM Trader A") received a customer order fora three-legged options transaction consisting of27,450 option spreads. JPMTrader A agreed to facilitate the trade.

5.

At approximately 11: 10: 17 a.m., JPM Trader A entered the entire customer
options order for electronic execution on ISE. JPM Trader A received a reject
message cancelling the order almost instantaneously from ISE. Nonetheless, at
11: 10:21 a.m., JPM Trader A instructed another JPM trader on a different desk("JPM Trader B") to enter JPM's hedging order to buy the underlying security.
As a result, at 11: I 0:21 a.m., JPM Trader B entered and executed an order to buy2

83,280 shares of the underlying security to partially hedge JPM's facilitation of
the customer options order. 3
6.

At 11:10:33 a.m., and after JPM' s hedging order had been executed, JPM Trader
A rerouted to ISE an electronic facilitation for 14,000 option spreads of thecustomer options order, which executed. At 11: 10:5 l a.m., JPM Trader A
instructed an unaffiliated options floor broker to cross the remaining 13,450
option spreads of the customer's order on a different exchange.

7.

By entering a hedging order to buy the underlying security before the terms andconditions of the customer options order had been disclosed to the market, JPM
violated ISE Rule Options 9, Section 1.02.
October 21, 2020

8.

On October 21, 2020, JPM Trader C received a customer order to sell 2,000 calls
in options series 1 and buy 2,000 calls in options series 2 (the "call spreads").
JPM Trader C agreed to facilitate the trade at 2:46:16 p.m.

9.

At 2:48:02 p.m., JPM Trader C routed and executed an electronic facilitation for
500 of the 2,000 call spreads on ISE. As the facilitating contra side, JPM needed
to sell approximately 15,000 shares of the underlying security to hedge its
facilitation trade. Instead, at 2:48: 14 p.m., JPM Trader C entered an order to sell
25,000 shares, which executed between 2:48:14 p.m. and 2:49:51 p.m. By doingso, JPM overhedged the portion of the customer options order that had been
disclosed to the market by approximately 10,000 shares.

I 0.

At 2:50: 10 p.m., JPM Trader C routed and executed an electronic facilitation for
an additional 500 of the 1,500 remaining call spreads on ISE. As the facilitating
contra side, JPM again needed to sell approximately 15,000 shares of theunderlying security to hedge its second facilitation trade. Instead, at 2:50:47 p.m.,
JPM Trader Centered an order to sell 20,000 shares of the underlying security, of
which 9,800 shares executed between 2:50:47 p.m . and 2:51 :49 p.m. By
submitting an order to sell 20,000 shares, JPM again overhedged the portion of
the customer options order that had been disclosed to the market byapproximately 5,000 shares.

11.

At 2:51 :02 p.m., JPM Trader C routed and executed 500 of the 1,000 remaining
call spreads. At 2:51: 15 p.m., JPM Trader C then instructed an unaffiliatedoptions floor broker to cross the remaining 500 call spreads on a different
exchange. At 2:52:01 p.m., the remaining 10,200 shares of the original 20,000
share hedge order executed.

12.

By entering hedging orders to sell a total of 45,000 shares of the underlying
security between 2:48:14 p.m. and 2:50:47 p.m., JPM improperly overhedged the3JPM, as facilitating contra party, needed to buy approximately 582,000 shares ofthe underlying security in order tofully hedge the customer options order, the balance of which came from the desk' s existing inventory.

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disclosed portions of the facilitated customer options order by approximately
15,000 shares. As a result, JPM violated ISE Rule Options 9, Section 1.02.

October 14, 2022
13.

On October 14, 2022, JPM Trader D received a customer order to buy 2,000 calls
in options series 3. At 11:37:14 a.m., JPM Trader D communicated electronicallywith a broker, seeking contra-side interest for the customer order. At 11 :37:22a.m., the broker acknowledged the interest. At 11 :48:04 a.m., after learning thatinterest for the entire customer order was not available, JPM Trader D instructed
the broker: "OK lets [sic] cross the rest and try to get me out of some at the crosspls." The broker acknowledged "ok" a few seconds later at 11 :48: 18 a.m ..

14.

At 11 :51 :06 a.m., JPM Trader D began entering hedging orders to purchase
options in the same underlying security as a hedge, buying 101 options before
canceling the order at 11 :51: 17 a.m. At 11 :51 :21 a.m., JPM Trader D entered anorder to buy more options in the same underlying security as a hedge, buying 26
options before canceling again at 11 :51 :28 a.m. After the cancelations, JPM
Trader D realized that the broker had not sent any fills from the facilitation andceased entering further hedging orders.

15.

At 11 :51 :42 a.m., JPM Trader D contacted the broker to ask if the customer order
had been printed. At 11 :51 :57 a.m., the broker replied that the trade was "Goingup now." The customer order was printed at 11 :52:31 a.m., with the Firm
facilitating half the customer order.

16.

By entering hedging orders to buy options contracts in the same underlying
security as the customer options order before the customer options order had been
disclosed to the market, JPM violated ISE Rule Options 9, Section 1.02.

17.

JPM self-identified and self-reported this trading activity to the ISE Enforcement
Department in the course of this investigation.
Supervision18.

ISE Rule Options 9, Section 2 provides that "[n]o Member shall engage inconduct in violation of the Exchange Act, the By-Laws or the Rules of theExchange, or the Rules of the Clearing Corporation insofar as they relate to thereporting or clearance of any Exchange Transaction, or any written interpretation
thereof. Every Member shall so supervise persons associated with the Member as
to assure compliance therewith."19.

ISE Rule Options 9, Section 1 provides that "No Member shall engage in acts orpractices inconsistent with just and equitable principles of trade. Persons
associated with Members shall have the same duties and obligations as Members
under the Rules of this Options 9."

420.

B.

Although JPM had daily monitoring in place to flag for potential anticipatory
hedging and front running of customer orders, its supervisory system was notreasonably designed to assure compliance with ISE Rule Options 9, Section 1.02.
Specifically, during the Relevant Period, the Firm did not conduct reviews oftransactions across different aggregation units, and thus did not identify theAugust 2, 2019, anticipatory hedging activity. In addition, due to a coding issue,
the Finn's monitoring logic failed to identify potential anticipatory hedging
activity in connection with facilitation trades for multi-leg customer options
orders, and thus did not identify the October 21, 2020, anticipatory hedging
activity. JPM fully remediated both deficiencies in July 2022. The conduct
described in this paragraph constitutes violations ofISE Rule Options 9, Sections
2 and I.

The Firm also consents to the imposition of the following sanctions:1.

A censure and a total fine in the amount of$90,000. 4

Respondent agrees to pay the monetary sanction(s) in accordance with its executedElection of 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 ISE Enforcement
Department staff.

TI.
WAIVER OF PROCEDURAL RIGHTS
Respondent specifically and voluntarily waives the following rights granted under ISE's Code ofProcedure:A.

To have a Formal Complaint issued specifying the allegations against the Finn;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 havea written record of the hearing made and to have a written decision issued; andD.

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

4

The balance of the sanction, for a total fine amount of$230,000, will be paid to NYSE Arca, Inc. and NYSE
American LLC, which conducted a parallel investigation to this matter.

5Further, Respondent specifically and voluntarily waives any right to claim bias or prejudgmentof the Chief Regulatory Officer, the ISE Review Council, or any member of the ISE Review
Council. in connection with such person's or body's participation in discussions regarding theterms and conditions of this A WC, or other consideration of this AWC, including acceptance orrejection 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 and until it
has been reviewed and accepted by the ISE Enforcement Department and the ISE Review
Council, the Review Subcommittee, or the Office of Disciplinary Affairs ("ODA"),
pursuant to ISE 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 A WC will become part of the Respondent's permanent disciplinary recordand may be considered in any future actions brought by ISE or any other regulator
against the Respondent;

2.

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

Respondent may not take any action or make or permit to be made any publicstatement, including in regulatory filings or otherwise, denying, directly orindirectly, any finding in this AWC or create the impression that the AWC iswithout factual basis. Respondent may not take any position in any proceedingbrought by or on behalf of ISE, or to which ISE is a party, that is inconsistent withany part of this A WC. Nothing in this provision affects the Respondent' s right totake legal or factual positions in litigation or other legal proceedings in which ISE
is not a party.

Respondent may attach a Corrective Action Statement to this A WC that is a statement ofdemonstrable corrective steps taken to prevent future misconduct. Respondent
understands that it may not deny the charges or make any statement that is inconsistent6with the AWC in this Statement. This Statement does not constitute factual or legalfindings by ISE, nor does it reflect the views of ISE or its 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 opportunityto 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.

J.P. Morgan Securities LLC
Respondent~

By: - - - - -----""""-c-,- - - - --Print Name: Michael Kurd
Title: Managing Director

Accepted by ISE:

3/30/23

Signed on behalf of theDirector of ODA, by delegated authority

DateMuyiwa Odeniyide
Enforcement Counsel
ISE Enforcement Department8