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

Sumo Capital, LLC
Mr. Daniel Gutman
Principal Counsel
440 South LaSalle Street
Suite 2101
Chicago, IL 60605

FROM:

Nasdaq PHLX LLC ("PHLX")
do Financial Industry Regulatory Authority ("FINRA")
Department of Enforcement
9509 Key West Avenue
Rockville, MD 20850

DATE:

May 9, 2018

RE:

Notice of Acceptance of Letter of Acceptance, Waiver and Consent No. 20150467547-01

Please be advised that your above-referenced Letter of Acceptance, Waiver and Consent ("AWC") has
been accepted on May 9, 2018 by the PHLX Review Council's Review Subcommittee, or by the Officeof Disciplinary Affairs on behalf of the PHLX Review Council, pursuant to PHLX Rule 9216. A copyof 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 disciplinaryaction. 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 are reminded that Section I of the attached Letter of Acceptance, Waiver, and Consent includes anundertaking. In accordance with the terms of the AWC, a registered principal of the firm is required tonotify the Compliance Assistant, Department of Enforcement, 9509 Key West Avenue, Rockville, MD
20850, of completion of the undertaking.
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 hasbeen imposed.

Sumo Capital, LLC
Page 2If you have any questions concerning this matter, please contact Renee Barnett, Senior Counsel, at(240) 386-6107.

cA.410 2r,.,
Gerard P. Finn
Senior Director
Department of Enforcement, FINRA
Signed on behalf of PHLX

Enclosure
FINRA District 8 — Chicago
Edward Wegener
Senior Vice President and Regional Director(Via email)NASDAQ PHLX LLCLETTER OF ACCEPTANCE, WAIVER AND CONSENT
NO. 20150467547-01
TO:

Nasdaq PHLX LLC
do Department of Enforcement
Financial Industry Regulatory Authority ("F1NRA")RE:

Sumo Capital, LLC, Respondent
Member Firm
CRD No. 146310

Pursuant to Rule 9216 of Nasdaq PHLX LLC ("PHLX") Code of Procedure, Sumo Capital, LLC(the "firm" or "Respondent") submits this Letter of Acceptance, Waiver and Consent ("AWC")
for the purpose of proposing a settlement of the alleged rule violations described below. ThisAWC is submitted on the condition that, if accepted, PHLX will not bring any future actions
against the Respondent alleging violations based on the same factual findings described herein.

I.
ACCEPTANCE AND CONSENTA.

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 member of PHLX since February 3, 2009, and its registration
remains in effect. The firm has no relevant disciplinary history.
SUMMARYIn STAR No. 20150467547, the staff of the Options Regulation team of the Departmentof Market Regulation, on behalf of PHLX, reviewed the firm's quoting and message
activity during the period December 3, 2013 through October 2015 (the "review period")
More specifically, FINRA staff reviewed the firm's compliance with requirements of
SEC Rule 15c3-5 of the Securities Exchange Act of 1934 ("SEC Rule 15c3-5"), as well
as PHLX rules, pertaining to establishing a reasonable supervisory system, including
written supervisory procedures, designed to appropriately manage the financial,
regulatory, and other risks of its business activity during the review period. FINRA staff
also reviewed the firm's compliance with SEC Rule 15c3-5 and supervision on behalf ofCboe EDGX Exchange, Inc. and Cboe BZX Exchange, Inc. (collectively, the"Exchanges").
As detailed below, the firm had inadequate risk management controls and supervisory
procedures pertaining to market access with respect to detecting and preventing certain

STAR No. 20150467547 (incl. merged STAR Nos. 20160519375 and 20170556025) (RJB)

unintentional messaging activity, including quoting activity, and erroneous quotes ororders on PHLX and elsewhere, contrary to the requirements of SEC Rule I5c35(c)(1)(ii) and PHLX Rules 748 and 707 concerning supervision and just and equitableprinciples of trade.
FACTS AND VIOLATIVE CONDUCTApplicable Rule4
1. SEC Rule 15c3-5 is designed to reduce the risks faced by broker-dealers, as well as
the markets and the financial system as a whole, as a result of various markets accessarrangement, by requiring effective financial and regulatory risk management
controls reasonably designed to limit financial exposure and ensure compliance withapplicable regulatory requirements to be implemented on a market-wide basis.
2. SEC Rule 15c3-5(b) requires, among other things, a broker-dealer with market
access, as defined by that rule, to "establish, document, and maintain a system of risk
management controls and supervisory procedures reasonably designed to manage thefinancial regulatory, and other risks" of its market access activity and to preserve a
copy of such supervisory procedures and a written description of its risk management
controls as part of its books and records.
3. SEC Rule 15c3-5(c)(1)(ii) further provides that the risk management controls andsupervisory procedures required by Rule 15c3-5(b) must be reasonably designed toprevent "[prevent the entry of erroneous orders, by rejecting orders that exceed
appropriate price or size parameters, on an order-by-order basis or over a short periodof time, or that indicate duplicative orders."
4. PHLX Rule 748 requires each member to establish, maintain, and enforce written
supervisory procedures, and a system for applying such procedures, to supervise thetypes of businesses in which the member organization engages and the written
supervisory procedures and the system for applying such procedures shall reasonably
be designed to prevent and detect violations of the applicable securities laws andregulations, and rules of PHLX.
5. PHLX Rule 707 requires each member to avoid engaging in conduct inconsistent withjust and equitable principles of trade.
The Firm's Deficient Market Access and Supervision Procedures
6. During the review period, the firm failed to have proper supervision in place because
the firm's risk management controls for market access and supervisory system,
including written supervisory procedures, were not reasonably designed to comply
with SEC Rule 15c3-5 with respect to the detection and prevention of potentiallyerroneous, duplicative and/or unintentional order or quote activity.

2

7. During the review period, the firm sent unintentional quotes to PHLX over a shortperiod of time for certain option series and did not have reasonable controls in place
to prevent this type of message activity from being sent to the Exchanges. The firm
also lacked reasonable controls in place to prevent the entry of unintentional
quotations with prices significantly away from the national best bid or offer forcertain options series. In addition, controls put in place during the review period werenot adequately documented.
8. In addition, during the review period, the firm did not have reasonable supervisory
procedures in place to review for instances where unintentional quotes were sent withprices significantly away from the national best bid or offer. The firm also lacked
supervisory systems or procedures in place to ensure that any controls the firm wasusing were activated on all of its systems and ports sending quotes to the Exchanges.
9. For the foregoing reasons, the firm's risk management controls and supervisory
procedures during the review period were not reasonably designed to comply withSEC Rule 15c3-5(c)(l)(ii). Accordingly, the firm violated SEC Rule 15c3-5.
10. In addition, the firm violated PHLX Rules 748 and 707.
B.

Respondent also consents to the imposition of the following sanctions:
A censure, a fine of $50,000 (to be paid jointly to the Exchanges, of which $10,000
shall be paid to PHLX), and an undertaking to update the firm's risk management
controls for market access and written supervisory procedures with respect to theareas described in paragraphs 1.A. above. Within 30 business days of acceptance ofthis AWC, a registered principal of the firm shall submit to the COMPLIANCEASSISTANT, DEPARTMENT OF ENFORCEMENT, 9509 KEY WESTAVENUE, ROCKVILLE, MD 20850, a signed, dated letter, or an email from awork-related account of the registered principal toMarketRegulationComp@finra.org, providing the following information: (i) areference to this matter; (ii) a representation that the firm has addressed and corrected
the deficiencies described in paragraphs I.A., above; and (iii) the date the deficient
procedures were addressed and corrected by the firm. Upon written request showing
good cause, FINRA staff, on behalf of PHLX, may extend any of the procedural dates
set forth herein.
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 F1NRA staff.

3

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 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.

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 FINRA'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 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 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 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 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 firm to submit it.
Sumo Capital,
RespondentC,

By:
DatePrint Name:
Title:"/ le (PrieJe. s in e,

Reviewed by:Counsel for Respondent
Firm Name

Accepted by PHLX:

DateSigned on behalf of theDirector of ODA, by delegated authority

Gerard FinnSenior Director
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):
0A firm check or bank check for the full amount

XI

Wire transfer
Respectfully submitted,Respondent
Sumo Capital, LLC
By:

DateName:Title:04") 16 (t., ''%-"A't._er , pici e ,iBilling and Payment Contact
Please enter the billing contact information below. Nasdaq MarketWatch will contact you withbilling options and payment instructions. Please DO NOT submit payment until Nasdaq has
sent you an invoice.

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Billing Contact Address: 'PP C

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Billing Contact Email: d.)4 On 6- vl VI-

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Billing Contact Phone Number:STAR No. 20150467547 (incl. merged STAR Nos. 20160519375 and 20170556025) (RJB).2. 1° 7