In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 16-3423 

CHICAGO BOARD OPTIONS EXCHANGE, INC. 

Petitioner, 

and 

NASDAQ OMX PHLX, LLC, 

Intervening Petitioner, 

v.

SECURITIES AND EXCHANGE COMMISSION, 

Respondent, 

and 

CITADEL SECURITIES, LLC, et al.

Intervening Respondents.

____________________ 

Petition for Review of an Order of 

the Securities and Exchange Commission. 

No. 3-17189 

____________________ 

ARGUED MARCH 29, 2018 — DECIDED MAY 7, 2018 

____________________ 

Before BAUER, FLAUM, and MANION, Circuit Judges. 
2 No. 16-3423

FLAUM, Circuit Judge. In Citadel Securities, LLC v. Chicago 

Board Options Exchange, Inc., we held that “the district court 

did not abuse its discretion in dismissing [the] case [of certain 

securities firms] for failure to exhaust administrative remedies.” 808 F.3d 694, 701 (7th Cir. 2015) [hereinafter Citadel I]. 

Following that decision, the securities firms filed a petition 

before the Securities and Exchange Commission (“SEC” or 

“Commission”) seeking damages from various securities exchanges for improper fees. The SEC dismissed that petition 

for lack of jurisdiction. The securities exchanges now appeal 

that order. We affirm. 

I. Background 

Following our decision in Citadel I,1 certain securities firms 

(the “Market Makers”)2 filed a petition with the SEC. The petition alleged that over a ten-year period the Chicago Board 

 

1 We laid out the full history of this litigation in Citadel I. See 808 F.3d 

at 697–98. For purposes of this appeal, we focus primarily on the events 

subsequent to our decision in that case, providing additional background 

as necessary. 

2 A “market maker” is a “broker-dealer firm that accepts the risk of 

holding a certain number of shares of a particular security in order to facilitate trading in that security.” Jaclyn Freeman, Note, Limiting SRO Immunity to Mitigate Risky Behavior, 12 J. on Telecomm. & High Tech. L. 193, 

214 n.174 (2014) (citation omitted). “[M]arket makers create liquidity by 

being continuously willing to buy and sell the security in which they are 

making a market.” Newton v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 135 

F.3d 266, 268 (3d Cir. 1998) (en banc). Relevant to this appeal, the Market 

Makers include: Citadel Securities, LLC; Ronin Capital, LLC; Susquehanna Securities; and Susquehanna Investment Group. 
No. 16-3423 3

Options Exchange and Nasdaq (the “Exchanges”)3 “mischarged the Market Makers potentially millions of dollars.” 

Specifically, the Market Makers claimed that the Exchanges 

improperly imposed fees under Payment for Order Flow 

(“PFOF”) programs.4 The petition requested that the Commission compel the Exchanges to (1) “provide a full accounting” of the fees wrongly charged; and (2) award damages in 

that amount, or in the alternative, order disgorgement of the 

improperly charged fees. 

On April 1, 2016, the SEC ordered briefing as to whether it 

had jurisdiction to review the Market Makers’ petition. The 

Market Makers argued the “the Commission ha[d] no statutory authority to exercise jurisdiction over this matter.” The 

 

3 The Exchanges are both national securities exchanges registered 

with the SEC. They operate as self-regulatory organizations (“SROs”) and 

regulate markets in conformance with securities laws under the Exchange 

Act. See Citadel I, 808 F.3d at 697. 

4 As we explained in Citadel I: 

PFOF is an arrangement by which a broker receives payment from 

a market maker in exchange for sending order flow to them. These 

fees are imposed to attract order flow to a market, thereby increasing liquidity in that market. [The Exchanges] impose[] PFOF fees 

on a market maker when a trade is made for a “customer”; however, these fees are not imposed for proprietary “house trades,” 

where a firm trades on its own behalf. 

[The Exchanges] have adopted rules creating the PFOF programs, 

as required under the Exchange Act. According to the SEC, the 

rules creating the PFOF programs are “designed to ensure that 

market makers that may trade with customers on the exchange 

contribute to the cost of attracting that order flow.” 

808 F.3d at 697 (quoting Competitive Developments in the Options Markets, 69 Fed. Reg. 6,124, 6,129 (Feb. 9, 2004)). 
4 No. 16-3423

Exchanges, citing our decision in Citadel I, maintained the SEC 

had jurisdiction under Section 19(h)(1) of the Securities Exchange Act (the “Exchange Act”) and the SEC’s Rules of Practice because the petition sought a determination that the Exchanges had violated their own rules. The SEC acknowledged 

our conclusion in Citadel I that “the plain language of the Exchange Act calls for SEC review of plaintiffs’ allegations of improper PFOF Fees,” see 808 F.3d at 699, but nevertheless held 

that it lacked jurisdiction over the Market Makers’ petition. 

First, the SEC explained that Section 19(d) of the Exchange 

Act, which authorizes it to review allegations that a national 

exchange has unduly “prohibit[ed] or limit[ed] ... access to 

services,” see 15 U.S.C. § 78s(d)(1), did not apply to the Market 

Makers’ petition. It determined that the petition did not allege 

that the Exchanges had denied or limited access to any service. It also stated that even if it had alleged such a claim, the 

petition sought damages, which was “incongruous with” the 

SEC’s remedial authority under Section 19(d). 

Second, the SEC declined to exercise jurisdiction over the 

petition under Section 19(h)(1). That provision permits the 

SEC to take regulatory action against an exchange when “in 

its opinion such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of [the Exchange Act].” Id.

§ 78s(h)(1). The SEC reasoned that this text “exclusively authorizes ... the Commission, in its discretion, to commence an 

administrative disciplinary action against an [exchange],” but 

“does not authorize claims by private parties.” The SEC also 

determined that the provision only authorizes it “to suspend 

and/or impose limitations upon [an exchange] ..., not to 
No. 16-3423 5

award damages.” Because the Market Makers are private parties seeking damages, the SEC held that it lacked jurisdiction 

under Section 19(h)(1).5 

Next, in response to our statement in Citadel I that “sections of the Exchange Act explicitly provide for monetary 

penalties,” see 800 F.3d at 701, the SEC concluded that the Exchange Act said nothing about its power to award damages in 

private actions. It noted that it was permitted to impose civil 

penalties and seek disgorgement under certain sections of the 

Act, but clarified that “civil money penalties ... are not damages.” Because it determined that the Market Makers’ petition 

did not initiate a proceeding under any Exchange Act provision that permitted money penalties, it held it could not “provide ‘monetary compensation’ to the Market Makers.” 

Finally, the SEC noted that the mere fact that the dispute 

involved a rule overseen by the Commission did not provide 

it jurisdiction. As it explained, “[t]hat the fees at issue were 

imposed pursuant to rules subject to Commission review 

does not make the Commission the arbiter of any and all disputes about such fees or rules.” 

 

5 The SEC further reasoned that even if it was “to commence a litigated proceeding under Section 19(h)(1), that litigation would not be an 

adversarial proceeding between the Market Makers and the Exchanges.” 

It explained “[t]he parties to the proceeding would be the Exchanges and 

our Division of Enforcement, which would pursue claims against them, 

and the case initiating document would be our order instituting proceedings, not the Petition that the Market Makers have filed.” 
6 No. 16-3423

The CBOE appealed the SEC’s order to this Court, and the 

Market Makers and Nasdaq intervened pursuant to Federal 

Rule of Appellate Procedure 15.6

II. Discussion 

A. Standing and Jurisdiction 

15 U.S.C. § 78y(a)(1) provides that “[a] person aggrieved 

by a final order of the Commission entered pursuant to [the 

Exchange Act] may obtain review of the order” by filing a petition within sixty days in the appropriate United States Court 

of Appeals. The Market Makers argue that the SEC’s July 2016 

order did not “aggrieve” the CBOE and thus it has no standing to bring this appeal. We disagree. 

“A party is ‘aggrieved’ by an order if the order results in 

an ‘adverse effect in fact.’” Richards v. NLRB., 702 F.3d 1010, 

1014 (7th Cir. 2012) (quoting Harrison Steel Castings, Co. v. 

NLRB, 923 F.2d 542, 545 (7th Cir. 1991)); see also Aggrieved, 

Black’s Law Dictionary (10th ed. 2014) (defining “aggrieved” 

as “having legal rights that are adversely affected; having 

been harmed by an infringement of legal rights”). “‘As long as 

a charging party ... gets less than he requested,’ he is ... aggrieved ....” Oil, Chem. & Atomic Workers Local Union No. 6-418 

v. NLRB, 694 F.2d 1289, 1294 (D.C. Cir. 1982) (per curiam) (alteration in original) (footnote omitted) (quoting Chatham Mfg. 

Co. v. NLRB, 404 F.2d 1116, 1118 (4th Cir. 1968)). 

 

6 Shortly after the Commission dismissed their petition, the Market 

Makers filed a third complaint in state court, again alleging that the Exchanges improperly charged them PFOF fees. The Exchanges removed 

that action to a federal district court, which stayed the action pending the 

resolution of this appeal. 
No. 16-3423 7

Here, the SEC’s decision results in an “adverse effect in 

fact” for the Exchanges. The Exchanges affirmatively requested the SEC to exercise jurisdiction over the petition. The 

SEC did not do so. In other words, the Exchanges got “less 

than [they] requested.” See id. Thus, the CBOE is an “aggrieved party” and we have jurisdiction. 

B. SEC Jurisdiction Over the Petition 

We turn next to the central issue on appeal: whether the 

SEC has jurisdiction over the Market Makers’ petition. The 

parties disagree about whether we must defer to the SEC’s decision that it lacks jurisdiction under the Exchange Act. 

“When a court reviews an agency’s construction of the statute 

it administers, it is confronted with two questions.” Chevron, 

U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842 

(1984). 

First, always, is the question whether Congress 

has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the 

end of the matter; for the court, as well as the 

agency, must give effect to the unambiguously 

expressed intent of Congress. If, however, the 

court determines Congress has not directly addressed the precise question at issue, ... the 

question for the court is whether the agency’s 

answer is based on a permissible construction of 

the statute. 

Id. at 842–43 (footnotes omitted). This deference is applicable 

to “an agency’s determination of its own jurisdiction.” City of 

Arlington, Tex. v. FCC, 569 U.S. 290, 297, 305 (2013) (calling the 
8 No. 16-3423

idea that an agency’s interpretation as to the scope of jurisdiction receives no deference a “misconception”). 

We must first determine the “precise question” at issue. 

The SEC and Market Makers frame the issue as whether the 

Act grants the Commission jurisdiction to resolve a privateparty dispute requesting the repayment of improper PFOF 

fees. The Exchanges frame the issue as whether the Act grants 

the SEC jurisdiction to determine whether an Exchange has 

violated its rules. 

We agree with the SEC and Market Makers’ framing of the 

precise issue. The formulation urged by the Exchanges—that 

this is a determination about whether the Exchanges violated 

their own rules—is overly simplistic. By stating the issue 

solely in terms of the underlying violation, the Exchanges fail 

to account for the parties involved or the relief sought. Furthermore, they ignore the very reason why the SEC determined it lacked jurisdiction. As the Commission explained, 

“the Petition alleges, in effect, a billing dispute” between two 

private parties, and it requests the SEC order the Exchanges 

to “pay damages to the Market Makers” for improperly 

charging them fees under their PFOF programs. Thus, the 

precise question before the SEC was whether it had jurisdiction over a petition brought by private parties seeking damages for an alleged rule violation. That is narrower than 

simply asking whether the Exchanges violated their own 

rules. 

The Exchange Act does not speak to whether the SEC can 

adjudicate such a private party “billing dispute” seeking 

damages. Section 19(h)(1)’s authority to institute proceedings 

against an exchange for rule violations is entirely discretion-
No. 16-3423 9

ary and contains “no mention of damages or restitution.” Citadel I, 808 F.3d at 701. Section 19(d) is similarly unhelpful. 

While it allows the SEC to adjudicate claims between two parties where a “person aggrieved” files a petition challenging 

the exchange’s conduct, see 15 U.S.C. § 78s(d)(2), that authority extends only to limited circumstances not applicable here.7

Finally, while the Act permits the SEC to impose civil penalties and disgorgement, it says nothing about the SEC’s authority to issue money damages. 

Because the Exchange Act does not speak to this issue, we 

consider whether the SEC’s interpretation of the statute is reasonable. Chevron, 467 U.S. at 844. If so, we must accept it. Nat’l 

Cable & Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 

967, 980 (2005) (“If a statute is ambiguous, and if the implementing agency’s construction is reasonable, Chevron requires 

a federal court to accept the agency’s construction of the statute, even if the agency’s reading differs from what the court 

believes is the best statutory interpretation.”). 

The SEC determined that neither Section 19(h)(1) nor Section 19(d) provide it jurisdiction over the petition. We believe 

such a finding is reasonable. First, Section 19(h)(1) provides 

the Commission only with discretionary authority to conduct 

an enforcement proceeding and sanction an exchange for a 

rule violation. The SEC sensibly concluded that the text “does 

not provide for Commission jurisdiction over lawsuits initi-

 

7 The SEC can, for instance, review a national exchange decision that 

“imposes any final disciplinary sanction on any member ..., denies membership or participation to any applicant, or prohibits or limits any person 

in respect to access to services offered by such organization or member 

thereof.” 15 U.S.C. § 78s(d)(1). 
10 No. 16-3423

ated by and between private parties.” Second, the SEC reasonably found Section 19(d) did not provide it with jurisdiction 

because the Market Makers’ petition did not seek relief under 

that provision, nor allege any limitation or prevention of access to services. The petition sought only an accounting of improper fees and a refund of those fees, which are not cognizable claims under Section 19(d).8 

The Exchanges argue the SEC’s holding is unreasonable 

because it conflicts with our decision in Citadel I. We disagree. 

In Citadel I, we held that the district court did not abuse its 

discretion in finding the Market Makers had not exhausted 

their administrative remedies. 808 F.3d at 701. We merely concluded that the Market Makers “ha[d] not clearly shown that 

the SEC’s administrative procedure is futile or inadequate.” 

Id. at 700 (emphasis added). Critically, however, we emphasized that “[w]e [could] envision situations in which reliance 

on administrative remedies would be clearly futile and SEC 

review might not be required, but plaintiffs [had] not convinced us

that this is such a case.” Id. (emphasis added). Thus, our statement that “the plain language of the Exchange Act calls for 

SEC review of plaintiffs’ allegations of improper PFOF fees,” 

see id. at 699, must be read in the context of that limited holding. Given the posture of the case, our holding addressed only 

the broad strokes of the Exchange Act in relation to PFOF rule 

violations, and not, as the Exchanges would have us believe, 

the particular nuances of SEC jurisdiction over specific petitions before the Board. In short, our opinion in Citadel I does 

 

8 Moreover, as the SEC noted, the petition would be time-barred because a party must appeal under Section 19(d) within thirty days. The 

Market Makers learned that the fees were mischarged in 2012, but only 

filed their petition in March 2016. 
No. 16-3423 11

nothing to detract from the SEC’s reasonable conclusion that 

the Exchange Act does not provide it jurisdiction to review 

the Market Makers’ claims. 

III. Conclusion 

For the foregoing reasons, we AFFIRM.