Notice of Disciplinary Action Against Keystone TradingPartners, a Member Organization, and Eric Schmid and Vincent
Jackson, Associated Persons of Keystone Trading Partners
To:Members, Member Organizations, Participants and Participant Organizations

From:

John C. Pickford, Enforcement Counsel, NASDAQ OMX PHLXSM

DATE:June 21, 2012FINRA Matter No. 20100242460
FINRA Matter No. 20120323712
Enforcement No. 2012-08
On June 18, 2012, the Business Conduct Committee (the “Committee”) issued a disciplinary
decision against Keystone Trading Partners (“Keystone”), a member organization of theExchange, and Eric Schmid (“Schmid”) and Vincent Jackson (“Jackson”), associated persons ofKeystone. In response to a Statement of Charges issued in this action, Keystone, Schmid, andJackson submitted an Offer of Settlement, Stipulation of Facts and Consent to Sanctions(“Offer”). Solely to settle this proceeding, and without admitting or denying the charges,Keystone, Schmid and Jackson consented to findings that they committed violations of Exchange
Rule 1014, Commentaries .01 and .03, Exchange Rule 748(g), and Options Floor Procedures
Advices (“OFPAs”) B-3 and B-4. Specifically, Keystone and Schmid consented to findings thatduring the period between April 2010 and June 2010 (“Review Period I”), Schmid, on behalf ofKeystone, had effected 25.44% of his total options contracts in assigned options classes and had
thereby failed to satisfy the minimum number of options contracts he was required to trade inassigned options classes. Similarly, during Review Period I, Schmid, on behalf of Keystone, andwhile off-floor, had executed 175 options contracts in his market maker account that were not forthe purpose of hedging, reducing pre-existing risks, or rebalancing positions in his market makeraccount.
Additionally, Keystone and Jackson consented, without admitting or denying the charges, tofindings that during the period between January 2012 and March 2012 (“Review Period II”),
Jackson, on behalf of Keystone, and while off-floor, had executed 24.55% of his total options
contracts in person and had thereby failed to satisfy the minimum number of options contracts he
was required to trade in person. Keystone and Jackson also consented to findings that during
Review Period II, Jackson, on behalf of Keystone, had effected 3,409 options contracts in hismarket maker account that were not for the purpose of hedging, reducing pre-existing risk, orrebalancing positions in his market maker account.
Finally, Keystone consented, without admitting or denying the charge, to findings that during
Review Periods I and II, it had failed to establish, maintain and enforce written supervisory
procedures (“WSPs”), and a system for applying such procedures, that were reasonably designed
to detect and prevent violations of Exchange rules that require Registered Options Traders(“ROTs”) to execute a minimum number of options contracts in person or in their assigned
options classes during any given calendar quarter and govern ROTs’ off-floor trading.
The Offer submitted by Keystone, Schmid and Jackson was accepted by the Committee andwas the basis of its Decision. The Committee found that Keystone, Schmid and Jackson had
violated Exchange Rule 1014, Commentaries .01 and .03, and OFPAs B-3 and B-4; and that
Keystone had violated Exchange Rule 748(g). The Committee concurred in the sanctions
consented to by Keystone, Schmid and Jackson, and ordered the imposition of the following
sanctions against them: (i) a censure; (ii) a joint and several fine in the amount of $15,000;
and (iii) an undertaking, within 30 days of the issuance of a Decision by the Committee, to:(a) revise its WSPs to address the deficiencies identified by the Exchange;and(b) submit to Erin Saulino, FINRA Market Regulation, 1900 Market Street,
Eighth Floor, Philadelphia, PA 19103, a signed, dated letter, providing thefollowing information:(1) a reference to this matter;(2) a representation that Keystone has revised its WSPs to address thedeficiencies identified by the Exchange;(3) the date the revised WSPs were implemented; and(3) a Corrective Action Statement detailing what specific actions
Keystone has taken to prevent future violations of the provisions
regarding trading in person, in assigned options classes, and offfloor.

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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