NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 2019.11.0080
TO:Nasdaq PHLX LLC
Phlx Enforcement Department

RE:

Walleye Trading LLC, Respondent
Member Firm
CRD No. 136196

Pursuant to Rule 9216 of Nasdaq PHLX LLC (“Phlx” or the “Exchange”) Code of Procedure,
Walleye Trading LLC (the “Firm” 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 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 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 Phlx, or to which Phlx is a party, prior to a hearing and without an adjudicationof any issue of law or fact, to the entry of the following findings by Phlx:
BACKGROUND AND RELEVANT DISCIPLINARY HISTORYThe Firm became a Phlx member organization on August 25, 2005, and its registration
remains in effect. The Firm has no relevant disciplinary history.
SUMMARY
During the period from October 1, 2017 through November 12, 2019 (the “Review Period”),
the Firm violated Phlx Rules 1087(b)(1)(K) and 748(h),1 as set forth below.
FACTS AND VIOLATIVE CONDUCTPIXL Auction Violations

1. Price Improvement XL (PIXL) is the Phlx electronic price improvement mechanism
whereby an initiating member submits a two-sided order into an auction process solicitingprice improvement. It permits a Phlx member to electronically submit for execution anorder it represents as agent on behalf of a Public Customer, broker-dealer, or any otherentity against principal interest or against certain other orders it represents as agent
provided it submits the PIXL Order for electronic execution into the PIXL Auction

1Phlx Rules 1087(b)(1)(K) and 748(h) were renumbered and relocated to Options 3, Section 13(b)(1)(K) andGeneral 9, Section 20(h), respectively, in the Phlx rulebook. See Securities Exchange Act Release No.
88213 (February 14, 2020), 85 FR 9859 (February 20, 2020) (SR-Phlx-2020-03).

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(“Auction”) pursuant to Rule 1087.

2. Phlx Rule 1087(b)(1)(K) permits multiple PIXL Auction Notification (“PAN”) responses
from the same member submitted during the Auction; however, multiple orders at aparticular price point submitted by a member in response to a PAN may not exceed, inthe aggregate, the size of the PIXL order.
3. During the Review Period, the Firm, in 9,008 Auctions, inadvertently submitted morethan one order in response to a PAN at a particular price point that exceeded, in theaggregate, the size of the PIXL Order. As a result, the Firm entered orders for 36,898
more contracts than it should have, resulting in 509 executions. The violations occurred
due to a coding error with the Firm’s trading system that allowed different trading
strategies, while operating independently, to submit multiple responses at the same price.
The conduct described in this paragraph constitutes violations of Phlx Rule1087(b)(1)(K).
Supervision

4. Phlx Rule 748(h) requires a member organization to establish, maintain and enforce
written supervisory procedures (“WSPs”), and a system of supervision for applying suchprocedures, that are reasonably designed to supervise the types of businesses and activities
in which they and their associated persons engage in order to achieve compliance with,and to prevent and detect violations of, applicable securities laws and regulations,
including the By-Laws and Rules of Phlx.
5. During the Review Period, while the Firm had WSPs in place that addressed therequirements of Phlx Rule 1087, the WSPs were not reasonably designed to supervise thetype of businesses and activities in which it and its associated persons were engaged.
Specifically, Firm’s written supervisory procedures did not describe the specificindividual(s) responsible for supervision; (2) the supervisory steps and reviews to be takenby the appropriate supervisor; (3) the frequency of such reviews; and (4) how such reviews
shall be documented.
6. During the Review Period, the Firm did not establish, maintain and enforce any system ofsupervision to detect and prevent different trading strategies from submitting multiple
PAN responses at the same price that in the aggregate exceeded the size of the PIXL order.
7. Phlx acknowledges that the Firm has taken corrective actions to address the matter set
forth herein.
8. The conduct described in paragraphs five and six constitutes violations of Phlx Rule748(h).
B.

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

1. A censure; and2. A fine in the amount of $20,000 (comprised of $10,000 for the violations of Phlx Rule1087(b)(1)(K) and $10,000 for the violations of Phlx Rule 748(h)).
Respondent agrees to pay the monetary sanction(s) in accordance with its executedElection of Payment Form.
2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 Phlx Enforcement
Department staff.
II.
WAIVER 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 Firm;

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 Exchange Review Council and then to theU.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 Exchange Review Council, or any member of the Exchange
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.
III.
OTHER 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 the Phlx Enforcement Department andthe Exchange 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; andC.

If accepted:
3D.

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 IM-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 impression thatthe AWC is without factual basis. Respondent may not take any positionin any proceeding brought by or on behalf of Phlx, or to which Phlx is aparty, that is inconsistent with any part of this AWC. Nothing in thisprovision affects the Respondent’s right to take legal or factual positions
in litigation or other legal proceedings in which Phlx is not a party.

Respondent may attach a Corrective Action Statement to this AWC that is astatement of demonstrable corrective steps taken to prevent future 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 of Phlx
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 fullopportunity 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 the prospect of avoiding the issuance of a Complaint, has been made to
induce the Firm to submit it.
Walleye Trading LLC
Respondent
By: __________________________

Andrew Carney
Print Name: ___________________
CEOTitle: _________________________
October 26, 2020______________________
Date

Accepted by Phlx:
October 27, 2020______________________
Date__________________________________
Erik Wittman
Senior Enforcement Counsel
Phlx Enforcement Department
Signed on behalf of Phlx, by delegatedauthority from the Director of ODA5