Notice of Disciplinary Action against Credit Suisse Securities(USA) LLC, Member Organization
To:Members, Member Organizations, Participants and Participant Organizations

From:John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLXSMDATE:October 15, 2015

Enforcement No. 2015-10
FINRA No. 20110292793
FINRA No. 20120335476
On September 21, 2015, the Business Conduct Committee (the “Committee”) of theNASDAQ OMX PHLX LLC (“PHLX” or the “Exchange”) issued a disciplinary decision against
Credit Suisse Securities (USA) LLC (“Credit Suisse” or the “Firm”), a member organizationof the Exchange. In response to a Statement of Charges issued in this action, Credit
Suisse submitted an Offer of Settlement. Solely to settle this proceeding, and without
admitting or denying the charges, Credit Suisse consented to findings that during theperiod between June 30, 2011 and September 5, 2012 (the “Review Period”), Credit
Suisse violated Rules 15c3-5(b), (c)(1)(ii) and (c)(2)(i) promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Exchange Rules 707 and748(b), (d) and (g).
Specifically, Credit Suisse consented to findings that during the Review Period, but prior to
the June 14, 2011 compliance date of Rules 15c3-5(b), 15c3-5(c)(1)(ii) and 15c35(c)(2)(i) promulgated under the Exchange Act (the “relevant provisions Rule 15c3-5”), it
failed to: (i) adopt and implement adequate supervisory systems, controls and proceduresto prevent the entry of excessive orders and/or quotations by its proprietary algorithm;(ii) comply or enforce compliance with its written supervisory procedures (“WSPs”)
requiring it to test its algorithm and modifications thereto; and (iii) ensure that the resultsof such testing were documented and preserved in accordance with the Firm’s WSPs. For
example, on June 30, 2011, Credit Suisse unintentionally transmitted approximately
2,847,128 Immediate or Cancel (“IOC”) orders over an approximate one hour time period
in a single option series to the PHLX, which resulted in the execution of only 11 contracts
in the options series. Respondent did not detect, and at the time had no controls in place
to detect, the high volume of orders.
Despite the Firm’s pre-deployment testing of the algorithm, the Firm failed to preserve, orcould not provide, evidence that it had tested the algorithm or any modifications to thealgorithm prior to its deployment, or that any such testing was reasonably designed toprevent or detect the high volume of orders.
As a result of the conduct set forth above, Credit Suisse violated Exchange Rules 707 and748(b), (d) and (g).

Credit Suisse also consented to findings that during the Review Period, but after thecompliance date of the relevant provisions of Rule 15c3-5 promulgated under theExchange Act, it failed to adopt and maintain, on a pre-order basis or otherwise, anadequate system of risk management controls and supervisory procedures, including asystem of follow-up and review, reasonably designed to: (i) prevent the entry of a highvolume of orders and/or quotations; (ii) explicitly address Rule 15c3-5 promulgated under
the Exchange Act; (iii) ensure compliance with the relevant provisions of Rule 15c3-5; and(iv) prevent the transmission of, and to supervise the algorithm to ensure that it did nottransmit, an excessive number of orders or quotations to the PHLX. For example, on July21, 2011, as a result of the supervision-related deficiencies referenced above, Credit
Suisse unintentionally transmitted more than 14 million IOC orders during a time period ofseveral hours in a single option series to the PHLX, with no resulting executions in theoption series. As a result of this conduct, Credit Suisse violated Rules 15c3-5(b), (c)(1)(ii)and (c)(2)(i) promulgated under the Exchange Act and Exchange Rules 707 and 748(b),(d) and (g).
The Committee found that Credit Suisse had violated Rules 15c3-5(b), (c)(1)(ii) and(c)(2)(i) promulgated under the Exchange Act and Exchange Rules 707 and 748(b), (d)and (g), concurred in the sanctions consented to by the Firm, and ordered the impositionof the following sanctions against Credit Suisse: (i) a censure; and (ii) a total fine in theamount of $250,000, of which $175,000 shall be paid to the PHLX.
For more information, contact:•John C. Pickford, Assistant General Counsel, NASDAQ OMX PHLX, at +1 215 496 5273

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