Notice, Pursuant to Exchange By-Law 18-2, of Disciplinary
Action Against G-2 Trading, LLC, Member Organization
To:Members, Member Organizations, Participants and Participant Organizations

From:

John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLXSM

DATE:December 29, 2011

FINRA Matter No. 20100215753
Enforcement No. 2011-08
On December 21, 2011, the Business Conduct Committee (the “Committee”) issued adisciplinary decision against G-2 Trading, LLC (“G-2” or the “Firm”), a member
organization of the Exchange. In response to a Statement of Charges issued in thisaction, G-2 submitted an Offer of Settlement, Stipulation of Facts and Consent toSanctions (“Offer”). Solely to settle this proceeding, and without admitting or denying thecharges, G-2 consented to findings that during the period between January 1, 2009 andOctober 31, 2009 (the “Relevant Period”), it had violated Section 17 of the Securities
Exchange Act of 1934, as amended (“Exchange Act”), Rules 17a-3, 17a-3(a)(19)(ii), and17a-5 promulgated under the Exchange Act, and Exchange Rules 604, 703, 748, 760, and761 by, among other things: (i) failing to keep accurate books and records; (ii) filing an
inaccurate Financial and Operational Combined Uniform Single Report with the Exchange;(iii) failing to maintain a written, rather than verbal, agreement pertaining to its
compensation arrangement with an associated person of the Firm, and executed copies of
its written compensation agreements with nine associated persons of the Firm; (iv) failingto amend the Uniform Application for Securities Industry Registration or Transfer (“FormU-4”) filing of one Firm employee to reflect his status as a partner of an unaffiliated hedgefund, as well as the Form U-4 filing another Firm employee to reflect his affiliation with,and/or his investment interests in, various unaffiliated entities; and (v) failing to detect
errors and discrepancies regarding the existence, disclosure, number, location and/orreview of the brokerage accounts and account statements recorded on, or omitted from,the Insider Trading and Securities Fraud Enforcement Act of 1988 (“ITSFEA”) Accounts
Lists of 42 employees and associated persons, or the Master Review List of the Firm.
The Firm also consented, without admitting or denying the charges, to findings by theCommittee that G-2 had failed to: (i) establish, maintain and enforce written supervisory
procedures (“WSPs”), and a system for applying such procedures, that resulted insupervisory deficiencies regarding: (a) the Firm’s Joint Back Office arrangement with its
clearing firm and the minimum equity and other requirements to which the Firm wasrequired to adhere; (b) the category of associated persons required to register, and thecircumstances under which they were required to register, as Non-Registered Fingerprint
persons; and (c) the supervision or heightened supervision of a statutorily disqualifiedperson; and (ii) comply, or enforce compliance with, the requirements of its WSPs that G2 traders and/or employees complete Pre-Hire Consent, Trading Criteria, and Outside
Business and Affiliation Forms. For example, G-2 could not provide evidence that: (a) one

employee had completed the Pre-Hire Consent Form; (b) one employee had completed
the Trading Criteria Form; and (c) two employees had completed the Outside Businessand Affiliation Form.
G-2’s Offer was accepted by the Committee and was the basis of its Decision. TheCommittee found that G-2 had violated Section 17 of the Exchange Act, Rules 17a-3, 17a3(a)(19)(ii), and 17a-5 promulgated under the Exchange Act, and Exchange Rules 604,703, 748, 760, and 761, concurred in the sanctions consented to by it, and ordered theimposition of the following sanctions: (i) a censure; and (ii) a $12,500 fine.
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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