NASDAQ PHLX LLCNOTICE OF ACCEPTANCE OF AWC
Certified, Return Receipt Requested
TO:

Monadnock Capital Management, LP
Mr. Daniel C. Bigelow
President
291 West 9th Street#220
Wilmington, DE 19801

FROM:

Nasdaq PI ILX LLC ("PHLX")
c'o Financial Industry Regulatory Authority ("FINRA")
Department of Enforcement
9509 Key West Avenue
Rockville, MD 20850

DATE:

February 14, 2019

RE:

Notice of Acceptance of Letter of Acceptance, Waiver and Consent No. 2015046944501

Please be advised that your above-referenced Letter of Acceptance, Waiver and Consent ("AWC") has
been accepted on February 14, 2019 by the PHLX Review Council's Review Subcommittee, or by theOffice of Disciplinary Affairs on behalf of the PHLX Review Council, pursuant to PHLX Rule 9216. A
copy of the AWC is enclosed herewith.
You are again reminded of your obligation, if currently registered, immediately to update your Uniform
Application for Broker-Dealer Registration ("Form BD") to reflect the conclusion of this disciplinary
action. Additionally, you must also notify FINRA (or PHLX if you are not a member of FINRA) inwriting of any change of address or other changes required to be made to your Form BD.
You will be notified by the Registration and Disclosure Department regarding sanctions if a suspension
has been imposed and by Nasdaq's Finance Department regarding the payment of any fine if a fine has
been imposed.

Monadnock Capital Management, LPPage 2

If you have any questions concerning this matter, please contact Eustace Fra cis, Senior Counsel,
at (215) 209-7002.

T. F cis
Senior Counsel
Department of Enforcement, FINRA
Signed on behalf of PHLX

Enclosure
FINRA District 9 • Philadelphia
Michael SolomonSenior Vice President and Regional Director(via e-mail)Marjorie J. Peerce, Esq.
Ballard Spahr L.L.P.
1675 Broadway - 19th Floor
New York, New York 10019-5820

NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 2015046944501
TO:Nasdaq PHLX LLC
do Department of Enforcement
Financial Industry Regulatory Authority ("FINRA")RE:

Monadnock Capital Management, LP, Respondent
Broker-Dealer
CRD No. 124605•Pursuant to Rule 9216 of Nasdaq PHLX LW ("PHLX") Code of Procedure, Monadnock CapitalManagement, LP (the "Firm" or "Respondent") submits this Letter of Acceptance, Waiver andConsent ("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 bringany future actions against the Respondent 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 anadjudication of any issue of law or fact, to the entry of the following findings by PHLX:BACKGROUND
The Firm has been a PHLX member since January 2, 2003, and its registration remains ineffect. The Firm is headquartered in Wilmington, Delaware and operates as an options
market-maldng firm. The Finn has eight Registered Options Traders. The Firm has noprior relevant disciplinary history.
SUMMARY1.

From on or about September 19, 2012 to on or about January 31, 2014 (the "ReviewPeriod"), the Finn entered and mismarked as "closing" 49 opening options transactions(involving 994 contracts) in five options classes on 16 separate trade dates that wererestricted to closing-only transactions, in violation of Section 17 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), Exchange Act Rule 17a3(a)(6Xi), and PHLX Rules 707, 760, and 785. The Firm also failed to establish andmaintain a supervisory system and written supervisory procedures ("WSPs") that werereasonably designed to prevent and detect, insofar as practicable, the entry of opening
orders in restricted options classes and the mismarking of options, in violation of PHLX
Rules 748(h) and 707.

STAR No. 20150469445 (ET"F)FACTS AND VIOLATIVE CONDUCT2.

The policy underlying the recordkeeping provisions of the federal securities laws and
PHLX rules is to ensure that regulators have access to certain basic information about
securities transactions to allow them to properly regulate the securities markets. Accessto transaction records serves as an essential component for effective surveillance andexamination of broker-dealers by PHLX and other self-regulatory organizations.
Accurate recordkeeping, including the proper designation of orders as "opening" or"closing," helps to facilitate effective surveillance and oversight by regulators and ensure
the integrity of member firm books and records.

3.

Section 17 of the Exchange Act and Exchange Act Rule 17a-3(a)(6X0 require brokerdealers, such as Respondent, to make and keep a "memorandum of each brokerage order,
and of any other instructions, given or received for the purchase or sale of securities,
whether executed or unexecuted." All information included on the memorandum,
including whether the brokerage order is an "opening" or "closing" transaction, must be
accurate.

4.

PHLX Rule 707 prohibits member firms from engaging in conduct that is inconsistent
with just and equitable principles of trade. Conduct that violates any U.S. Securities andExchange Commission or self-regulatory organization rules or regulations constituteunjust and inequitable conduct.

5.

PHLX Rule 760 requires member firms to make, keep current, and preserve books andrecords as prescribed by the Exchange Act.

6.

PHLX Rule 748(h) requires member organizations to establish, maintain, and enforce
WSPs, and a system for applying such procedures, that are reasonably designed tosupervise the types of businesses and activities in which they and their associated persons
engage, and to prevent and detect, insofar as practicable, violations of applicablesecurities laws and regulations, including the By-Laws and Rules of PHLX.

7.

PHLX Rule 785 requires a member who effects or causes to be effected a proprietarytransaction in options for an account in which it has a direct or indirect interest to submit
or cause to be submitted in automated format to PHLX whether the options transaction isan open long or short transaction, or a close long or short transaction.

8.

During the Review Period, the Firm entered and mismarked as "closing" 49 opening
options transactions in options classes that were restricted to closing-only transactions.
These mismarks resulted in the execution and clearing of 994 contracts in five separate
options classes on 16 separate trade dates that should not have been executed: By
mismarking these transactions as "closing," the Finn also failed to make and keep
accurate records of instructions for the purchase and sale of these restricted options.

9.

The conduct described in paragraph 8 constitutes violations of Exchange Act Rule 17a3(a)(6)(i) and PHLX Rules 785, 707, and 760.

210.

The Finn also failed to establish and maintain a supervisory system and WSPs that werereasonably designed to prevent and detect, insofar as practicable, the entry of opening
orders in restricted options classes and the mismarking of opening orders as closing
orders. While the Firm's WSPs listed the relevant PHLX rules and federal securities
laws that governed restricted trading and related activities, the Firm failed to:*(i) provide
guidelines, procedures, or controls reasonably designed to detect or prevent trading in
restricted options classes or the mismarldng of options orders; (ii) address whether
supervisors should review for trading in, and mismarking of, restricted option classes;
how to review for such activities, and what escalation or remedial actions, if any, to takeif such activities are discovered; and (iii) monitor and review for restricted trading andrnismarking activities. Given these deficiencies, during the Review Period, the Firm'ssupervisory system and WSPs were not reasonably designed to achieve compliance with,or to detect and prevent violations of, the applicable order marking and restricted trading
provisions of the federal securities laws and PHLX rules. However, the Firm has since
updated its WSPs to memorialize system improvements the Firm has implemented withrespect to the entry of opening options orders in restricted options classes and themismarking of opening options orders as closing options orders.

11.

Additionally, during the Review Period, the Firm failed to reasonably respond toinquiries from its clearing firm with respect to trading in restricted securities and themismarking of opening orders as closing. On at least two occasions during the Review
Period, its clearing firm notified the Firm that the Finn may have mismarked options
orders and entered opening transactions in "closing-only" options classes. Despite these
inquiries, the Firm failed to: (i) investigate whether its traders had engaged in restrictedtrading or had mismarked options orders; (ii) discuss with its traders the potential
restricted trading or mismarking activity flagged by its clearing firm or to review theirtrades for such activity; and (iii) timely implement procedures or controls designed todetect and prevent such activities. Given these circumstances, the Firm failed tosupervise its associated persons or their trading activities in a manner reasonably
designed to achieve compliance with, or to detect and prevent violations of, theapplicable order marking and restricted trading provisions of the federal securities lawsand PHLX rules.

12.

The conduct described in paragraphs 10 and 11 constitutes violations of PHLX Rules
748(h) and 707.

B.

Respondent also consents to the imposition of the following sanctions:
A censure; a total fine of $35,000 ($25,000 for the trading and books and records
violations and $10,000 for the supervision violations); disgorgement in the amount of$1,263.
Respondent agrees to pay the monetary sanction in accordance with its executed Electionof 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 imposed in this matter.
3

The sanctions imposed herein shall be effective on a date set by FINRA staff.
ILWAIVER 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 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 have a written record of the hearing made and to have a written decision issued;
andD.

To appeal any such decision to the PHLX 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 PHLX Review Council, or any member of the PHLX
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.
DLOTHER 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 F1NRA's Department of Enforcement
and the PHLX 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; and4

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 1M-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
in this 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 figure 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 ofPHLX or its staff.

5

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 Finn to submit it.

Date

Monadnock Capital Management, LP
Respondent

By: Za.,-Z_O

0' ilifi-te.A.3Name: .,v1;1-‘eVAZ

Title:

PreE:114'"`-t-Reviewed by:Matjorie)heerce
Counsel for RespondentBallard Spahr LLP
1675 Broadway — 19th Floor
New York, NY 10019-5820

Accepted by PHLX:

Daterancis, Esq.
elSenior
Department of Enforcement
Signed on behalf of PHLX, by delegatedauthority from the Director of ODA

6

ELECTION OF PAYMENT FORM
The Firm intends to pay the fine proposed in the attached Letter of Acceptance, Waiver andConsent by the following method (check one):CIA Firm check or bank check for the full amount
Wire transferRespectfully submitted,

RespondentMonadnock Capital Management, LP

7•612.019
DateB,e-Name:e.

Title

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