F1nra?

"
Financial Industry Regulatory Authority
June 16, 2014
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
Citadel Securities LLC
Mr. Michael Weiner
General Counsel
131 South Dearborn Street
32"d Floor
Chicago, IL 60603
RE: Payment of Fine in Connection with Executed Letter of Acceptance, Waiver and Consent
FINRA Matter No. 20100223345-03
Dear Mr. Weiner:
Enclosed is an executed copy of the Letter of Acceptance, Waiver and Consent ("AWC"), signed
by Michael Weiner as General Counsel at Citadel Securities LLC (the "Firm") and countersigned
by Tamara Schademann, Chief Regulatory Officer, at BATS Exchange, Inc. Please consider this
correspondence as notice to the Firm that thi s A WC has been accepted, and as a result, the Firm
must remit payment of the agreed upon sanction when the matter becomes final. Please make the
payment to "BATS Exchange, Inc. "
The payment should be sent to the following address:
BA TS Exchange, Inc.
Attn: Jeff Connell, Vice President, Market Oversight
8050 Marshall Drive, Suite 120
Lenexa, KS 66214
Also note that pursuant to BZX Rule 8.8, the decision in this matter is final 20 business days after
the issuance of the decision.
Investor protection. Market integrity. 9509 Key West Avenue t 240 386 4000
Rockville, MD www.fi nra.org
20850-3329
Citadel Securities LLC
Mr. Michael Weiner
June 16, 2014
Page 2
If you have any questions, please do not hesitate to telephone the undersigned.
Executive Vice President, gal Section
Depa1tment of Market Regulation, FINRA
Enclosure
cc: Jeff Connell, Vice President, Market Oversight, BA TS Exchange, Inc.
(via e-mail to jconnell@batstrading.com)
cc: Paul Eckert, Esq.,
Wilmer Cutler Pickering Hale and Dorr LLP
1875 Pennsylvania Avenue, NW
Washington, D.C. 20006
This letter is issued on behalf of BATS Exchange, Inc. by FINRA Market Regulation pursuant to a
grant of authority to FINRA. Accordingly, this constitutes a letter by BATS Exchange, Inc.
'i3ATS EXCHANGE;-INC,
LETTER OF ACCEPTANCE, WAIVER AN-D CONSENT
NO.
TO: BAT'S Exc.lrnnge, foe,
clo Departltlent o:IM!irket Regulntion
Finnncioi .Indus.try Regulfltory A\1thority ("FlNRA")
RE: Citaoel SecuritiesrJ.LC, ReSJ)<,mdcnt
B.\'oker-Denle\'
CRD No. l 1:6797
Pursllant to Rule 8.3.of the-R\lles of.BATS Exclrnnge; Inc. (''BZX
11
}> Cftadel Sec\1rities LtC
C'CDRG" or the "firm") sub1rtiis this. Lette1 of Acceptance, Waiver tind Cons.ent ("A WC") for
the puipose of proposing a settlement of the alleged rnle violations described bel.C?w. This A WC
is submitted on the condition that, ir accepted, BJ..X will not bring any future ncttoM ngai'nst the
fil'm nlH1ging violatibns bnse'd on the same factual findings deScJibed hereiu,
I.
AND CONSENT
A. The finn hereby accepts m'.id consentsi without. admitting oJ denying the findii1gs, and
solely .fot the of this proceeding and any other proceed fog biougnt by 01 on
behalf of BZX, or to which BiX is a party, pri.or to a hearing an(\ with9ut im a<Uuclication
of imy issue offow or.fact; to the entry of the following by BZX:
BACKG'ROUND
CDRG hns been 11 member ofFINRA since 2005 and a mernber ofBZX since 2008, and
both re'gislrntions remain in effect. As a retail equity rmirket rnake.t',in the United. Sfotes,
CDRG provides execution services 1<> millfons 0fretail investors thro\1gb the finn's
broker dealer clients. CDRQ. nlso engages .in proprietnry trading for its own account.
!lELEVANT PRIOR DISCIP'LINARYIIIST<?RY
On June 29, 20 J 0,. the firm was censmed and fined. $10,000 by the NASDAQ. Stock
.Market LLC ("Nasdaq") for .violati.01is bf Nasdaq Rules 2.1.10 <u.1d 30 I 0 foi dcffoiencies. in
the firm's supervisory system and w,ritten superviso1y .proccdhres concerning the
prcventio.n of enoncot1s orders and transactions and clenr!y erroneotis
transaction com,plaints.
.20 I 002233'15 (incl. 20120342552, 20 l2035 l 663, 20110291338, 20 l 30375933,.2-0'i'40402566nnd 201404l1'909) (Ind)
S.27.14
UMMARY
This molter 1n\lolves CDJ?.G 's foil me to reasonably prevent the transinission of euoneoiis
orders to Nasdaq, BZX, BATS Y-Exchnngc, Inc. ("BYX"), and NYSE Arc.a, Inc,
("NYSE Arca") (tl1e "exchiniges") during the Mmch 1 $, 20 l 0 through Feb.ruary
28, 2014 ("review pcrlod").
On 24 occasions between March 18, 201.0 <1nd Jnl'l\mry 8, 2lH3,.CDRG
used the exchanges' clearly erroneoU,s petition processes to obtain
cancellations of customer orc:Jeis that tj\e firm's supervisory
procedures atld c611frols failed t6 rensonably detect <ind prevent.
Separately, in Aprll 20 W, while im:t>lementing a software upgrnde; CDRG
released fl test version of a previously abandoned software updnte, causing
n quoting system to send aggressively priced marketable sell limit orClers
to the excrunges. This l'elense caused CDRG to erro.neously sell short
2. 75 million shares of P,C Group, Inc. dt1ring an eleven .minute period,
' In August 26:11, CDRO. released an updnted vers'ion of.its oi'der sizing
soflwar.c for one of the 'finn
1
pr6prlefilry The 1elease
caused l.hc trading stralegy to e1iter into fln ordc.r canceJJiitipn
loop.
In July 2012 and November 2012, pre-order checks in \!Se by CbRG,
which were designed to prevent tlie entry of repetitive orders, foiled to
prevent the transmissioi1 of millio11s ofrepetitive orders to BZX. Each
order was cimccllcct befote exccUtioli nnd Within Si(1\1c i'nilliS.cc.ond.
On December 13, 2012, CDRG appJied innccut!atemnrk()t t.o the
.fil'm's when. a CDRG data se.rv.enled!cn'ted .to ha.ncU,ing NYSE
Al'c&,n'Jittket data foiled:to up prope1ly. Tllis failme:qau.scdGJ)RG's
propritmy fra,di(lg tlesk send,, tlui'ing ii.'two mi.ii,ufe _pe1'.lodi
li1i1it otde'rs in 16. different stock $yh)bols to the
exc'hnngcs.
In connection with a code renrrangement p.roject in Janunry
2014,- CDRG misconfigured certain software code and caused ihe de
ac.tivil.tion.of-a control designed to p.revenra.trading strategy i'n use by
CDRG ffo111 in excess .of 200.orders .. in a given
secntitY. symbol. Due to .tl!Js misqonftm1raiion, :tlie conirol failed t.o
activate when. the:<renrranged .. was i ntroquced .into n produotJon
environment. n restilt) CDRG foiled to prevent the strategy
sending.nilll'icms of ordets to BZX, .BY'X, and other exchanges with few or
no exections. .
2
By failing to establish, maintain and enforce a supervisory system, including supervisor.y
pJ'ooedures nnd risk controls .reasqnElbly to: (1) cheak for ot.<lor
11ccur11c.y; (2) reject orders tlrntexceeded approp1'iate pri"ce m1d/oniize para-meters; (3)
reject <hlplicntive.orders; nn<l (4) monitor nppropriate .message activity, includi.ng
message actiYity. at .the firm and ilrarket level, CDRG violated BZX RulesS.1 ond
5.2 (for conduct occt11ting between 1 St 2010 and Febrnary 28,2014), .n)ld Rule
15c3"5 of the Securities Exqh11nge Act. of 19.34 ("Rule 15c3"5") (for cond.uct occ\nr.ing on
or after July 14,.2011),
FACTS AND VIOLATP/E CONDUCT
I. CDRG. conducts itit businessthrough folly-automntcd e!Cctronic trn<ii.ng desks,
four of which are the of thi s review.
2. CDRO's equity market rnrtking desk experienced two different types of errot\eous:
otder events during the review period: (l) erroneot1s o.rders submitted by
CDRG's broker den\el' c)jents. on bohalf of retail. custo1ners; nnd (2) err.oneous
orders genernted by CDRG's proprietary trading acltvity.
Customer Events involving CDRG's E911ity Market Making Desk
3. .In 24 )nsto,iwes during the review p-el'iod, CDRG'.s equity innlket lnaking desk
fai.led to prevent the trru1smission of erroneous customer orders. to the exchanges.
Transactions resulting fronrthe 24 erroneous customer orders affected .thepriae of
each security, in some cases; drnmnticolly. As on Scptcmbel' 23,
20:10, CDRG.fail.cd to block an i:rroneousiy critt;red,'cystoo\1fr.m1:ld<e.t order for . .
COR.<?s, of t)tis ert.on:oti.forQer. tQ tlie .wns
follo'?<'e<l by in the prjce of the
4. In each insttlnae cited al.Jove CbltG pelitip11ecl the exchailges
to cancel- the reiailtingexecutions on the srO:utid. th flt th.e t>rdc.rs. WCfe
el'rO!fe(>us. 17 of the 24 petitions werosub1riitted on the ground thut the customer
. mistnkcnly entered a m11rket order or stop order fnstcnd of.n lirpit order or stop
limit order. In most instnnoes, the exchanges granted CDRG' s petitions, in whole
or in part, nnd cnnceiledthe transnctioi1s resuiting from.the erroneous orders.
CDRG relied primarily on.post-trade fro_il) 'th.e exchrirtges., or in il few
from its customers, to identify the 01'clets and .the
execntions resulting therefrom.
5. At the beginning of the review-period in".April.20 l 0 and co1lti nuing tnroughJune
201 O, CDRG.had no spe.cific pre-trade risk control on the equity m11rkel
desk for preventing erroneous orde1's other than a requireme.nt
that the order sizenot exceed 999,999 shares. None of the.subject C\lstomer
orders triggered this order size coiltrol because none exceeded 999,999 shl\t'cs.
3
6. In June 20i 0, prior to the effective date of.Rule l 5d3-S, CDRG added a prc-u-i1cle
risk cont1:01 io the equity market making desk Which coinpared the sh!e of t11e
order .lo the average daily 11ading volume in the security. June
20 IO and Junua\'y 2013., CDRO modified this size/volume control on nrnltii>le
occasions, nm:(OW!l')g its parameters and adding new para1heters .to detect a
broader 1'm1ge of potentially 01-roncoc1s .orders. Notwithsta)'lqlpg these ch(mgos,
elToneous caistomer orders continue<} to piiss through tj1is cont101because1he
ordets did not exceed the:size and vohne parameters or, the security or order
fype was exoh1ded fron1this entrol's review. For exnmpl,e, i febl'll!\l'Y
2of2, c'bRG failed to prevent. an erionet>t1s custofr!er 01der of 105,257 shares
b-Ccause the sfac/vohlme co1itrol did npt appl)'-to Mt-held orders.
. .
7. ln.adtlitionto lhe deficie.ncies abpve, iriN.oven1ber 20.10 nnd
tluough the .encl ofthe review periodi CDRQ's risk c9ntr9l pnl'ameters
on the eq11ity n'la1;ket making desk were itindequalo beca\1sc they excluded .from
re.view whole of sec\tdties symbpls, ipciuding Nasdaq 100, S&P ro:o,
mid $TI(symbQ1s.
PC Group. foe. ("PCGR")
8. On Api:il 7, 2010, the equity. making desk en-onecrnsly on 11
proprietary t?asls, 2. 75 million "of PCGR
1
Qa\1sing share of PCGR
to foll by 77 pe1cent during nn.cle:ven.minute period. 2/l5 rnfllion share;; sold.
shor't equaled 567 percent of the average dciily volume of 485,086 for the month
of April 2010.
9. CDRG's profit and loss setvcr, a monitor thn.t !.\. re<Jl 'ti.n1e view Qf
CDRG's positions and profit and losses,.reflec.ted the la.rge
accumulating in PCGR, which alerted the CDRG desk and IT Supportpcrsonnel.
Upon.disco.very of this activity, CDIW disabled the desk's to sendquotes
inPCOR,
1 Q.. The enoneous executions hf PC GR were by an pnrtof
CDRG' s trading While ilnplcmen.ting n soft.Wote Upgrade, the firm
reletised mt onrelnted test verslo11 of n prevfously abnnd<med:.sof!Ware
This. UP.4.1.'te cn,sed the.firm "to trnns1'nit to 1he ex9hanges i:iggressi\e, ,
mll,l'.ketable sel.l llmii orders for 100 shares pe.r second.
Because the size of each orde.r-was less.than 999,9909 shares
1
CDR'G.'s
co11trol, Which was the primary pre-trade risk control for p1'eventlng eno1'leous
orders in place on the equity market anhat time, did not blo.ck the
orders.
11. CDRG had no .formal written policies, procedi1res or.controls in pince tonddrc-ss
tnodifications to the flirh's systenis, qtYoting systems, or at the
time of the PCGR event. Nor did CDRG \ssign an employee to continuously
monitor the system involved in this event.
4
Excessive Messaging
l2. On A\!gust 23', 201 1, CDRG's options nrnrket nrnking desk mn1pdat'ecf
version of its order sizihg sofuvare for one of the fitm 's proprietary trnding
strategies. The st'rategy was first relensed tel .an electronic desk
("quoter") \Vith fl small number of synibols. quoter, however, did not luiy a
confimrred wait timer. Thnt foct, combined wifh the new order sizing
logic, resulted in an. unintended '
1
loop'; in the strategy's order send and caiicef
iogic . .
13. N. a result, between August 23, 201 1 and August 31, 2011, CDRG sent multiple,
periodic bursts of order messages, at 10,000 orders per second, to the exchnnges.
This excessive messaging activity, which involved hundreds of thou.sands of
orders for more thall 19. million shares', two to iluee times per day. For
example, on Augi1sl 25, 20i 1, in one second, .CDRG sent 13.,917 order messages
to the exchanges ln one seout'ity totnling 2;410,100 shares. Each order wrls
displayed and cancelled before
14. None of the t isk.controls in force 0n the options market making desk were
by the mes.sC'\ge bmst events to 'the. brief dmation, und small size, of
oi'der.
15. Aftet' l'ecei:ving. an lngufry abo\1t the fitm 's order activity .from FINRA o:n August
31, 2011, CDRG 1\lOdiffod trading software on the options market making desk
to prevent recurrence of this activity.
16. On July 20, 20 ! 2
1
a preor(\er Qheck ih use. by CORO's lilMrlth)J'\iQ
wbtch desl.gn&I to prevent the entry of'rej:reiitive tb pl'ey.en.t the.
transinissi6i1 of approxirrrtitely' 783,62'0 'orders to BZX iii' three se<:urities symbols.
These 01ders were trnnsmitted to BZX at fl rate in excessof 1,000 ordeis per
second. Each order was cancelled before exeo\1tion.and within 'the same
millisecond.
17. In November.2011, a pre-order check in tise by CDRG's equity market m!\klng
desk, wMch wns designed to prevent the entry c;f repe.iitive orders in excess ..of
100 orders pel' second, faileclto prevent ihc ti:ansnrission of millions of o:r'dcl's to
BZX in 21 securities symbols. These orders .were trJ1nsmitted to B-2X. at a ill
excess Of 1
1
000 01'dets per second. Each otde1 wns 'Cancelled before execi1ti'Oll
nnd within .the s-mne mlllisecortd.
18. rn. with a prCijecf'completed.iuJimuruy 2014,
CDRO miscon'figured ccrtnii) so.f\.ware code and ca\1sed de-actiynHon of 1,1
control designed to prevent a trading strategy i'n by CDRG's equity
making de.sk f,roro entedng orde'rs in of 200 qide1's per second in n giyen
sy,m.bol (the
1
'thtflshing coi1troi'
1
): Due to thls misconfiguration, tho
control failedto activate the oode Wl1S fotroduoed into a
5
production environment. As a resull, CDRG failed to pt event the strategy from
sending millions of orders to the exchanges with or no executio11s. For
exan}ple
1
9n February 7, 2014, .Jn 46 sepornte involviog five different
sectrriti'es symbols, ODRG transmitted fo BYX order messages in of l.000
inessage:f per secortd, This activity involved tho .repented entry and orirtcellntlqn
Of internforket within the. same millisecotid. On the sli!ile date; in
seven irtst11nces.rnvolving seQt)l'itics symbots, CDRG' transmitted to
BZX 01:9er exces.s of i ,000 per s.e.concJ. This ac.tivitY. i1wolved the
1epeated entry and orders; followed by the imm.edinte p)aci;ment of
similar 01<lel's.
Decembel" 13, 2012 Data Server Pn!lure on CDRG's Proprietar_y Ti'adiiig Desk
19. dn December 13, 2012, a CDRG data server dedicated to hi\ndling NYSE Arca
mill'ket datn used by CDRG's proprietary trading desk failed to start np properly.
This follure caused a CDRG <lata server dedicated to handling NYSE Stock
LLC m!;ltk,et to cot)ne9t and dbrnemin'ate NY.SE Stock Exchm:ige
LLG datn in its place. The soflW1rre -by the finn the time did noi
separatelyrecord or denote the specific .exchnt)_B!} frQm which it uplonded
dafo, so a tra<li(lg stl't1tegy ii1tende(I f()r NYSE Arca down.lot1dedan hnflge of the
NYSE S'tock Exchange LLC inni'ket dnta. The tmnsp6s\tfoJ1 of the market: data
CDRQ'sp1:91)1' iefory trndingde.Sk to dtii'iitg a two minute.pe'riod;
erroneous hypeM'nark.etable limit ordersin 16 different sy11;1bols to the
exchanges. CDRG incurred a foss of approximately-$1 .4:tnil1ion on the resultjng
erroneous e'xecutlons. The exchnnges granted, in part', CDRG's petition (o cancel.
the executions, .reducing CDRO' s lo.ss to $400,000.
20. A.s one through '19 <luting tire review p.el'iod CDRG
foiled to:have risk management:conU:'ols nnd
qesigncd 'to detect an4 prevent the e.ilti.'y .of erroneot\soi'ders. Sy fiiiiing to
est1'blish, inaintnfnand enforce a supepiispxy iMluding s.upcrvisory
and risk ln\)nngement .co.ntr9ls-reasom1\jly designed to: (l}cl)eck for
orderffccmacy; (2) reject orders.tlrnt 'lppropl'iate price an0/or .size
J>arameters; (3) reje:ct duplicative o.rtlers; and (4) lnoni1Ql'
lev.elaciivity, inciud.ingn1essage actlviiy the dcsk,:firm lnarket fovcf,
CDRG vio!Rted.BZX Rules 5..1 and S .2 (for o.o.nduct between Mar.cir 18,
2010 and February 28, 2014), nnd Ruic 1 (for conduct occurring on or after
Ji.1ly IA, 2011).
6
B. ."The firm also coi1sents to the imposition of the following sanctfons:
A $800,000 (ofwhich $420,000 be paid toNasdaq, $160,000
to NYSE Arca; $100,000 to BZX, $70,000 to 'SYX, and $50,000 to .FINRA), a11d an
undertaking tosevise:lhe-fiim's \Vt'itteri supervisory procedures and risk t!lnnagement
controls to addtess the deficiencies described herein. Withirt .60 of
acce.ptiinpe o.f thi.s AWC by .BZX, u registered _pl'inclpnl Resilohaerirs'frnli-s\\.bmitto
the CQMPLfANCE A$SISTAN'.f
1
LEGAt SECTl.ON; MARK.ET REGULATION
DEPARTMENT:, 9509 KEY WEST AVENUE, ROCI\VlLLE, MD 20850, .a signe9,
dated letter, onrn e-mail from a work-related aecounl of the registered principal to
MarketRegufationCoinp@firun .. org, p.1:oviding the hiforn1afion: (I) areferehcc
to :this (2) & f1rm has revised its writte1\ S.tipervi.sory
procedures ai1d i-isk conirol,s the deficiencies c1esoribed herein; (3)
the date the revised written supervisory procedures ftlld risk conirols were
implemented; nnd (4) copies of the revised written supervisory procedi1res.and risk
ma)1agement controls.
The firm ngree$ to pay the monetary upon notice .th.nt lhi's A.WC has bee\1
accepted and that such payrnent(s)-are due nncl paynble. It hassubmllted an Election of
Payment form sh9wing the method by which it proposes to pay the fine imposed ..
The firm and voluntarily waives any right to claim that it is unable to pay,
now or at nny time hereafter, the monetary sanotion(s) imposed in this matter.
The sanctions imposed J1erein. shnll be effective on a date set.by BZX.
n.
WAlVER OF PROCEDURAL:lUGHTS
The firm specifically and _voluntnrily waives the following rlghts graiited u11del' BZX Rt1les:
A. To hiwe a Statement of Charges issued specifying the allegations against the firi:n;
B. To be notified of the Stntem.ent of .and have Uw opportunity to ansvier the
a!legatkms in writing;
C. To defenci .agaiQst tlie alicgations in a-disciplinary hearing before a Hearirig J,>anel, to
h'ave a written recotd of the hearing made and to have a '?fdttehdeoision .. and
D. To appeal i;ny 9uch dec.ision to the AJ)peals Comtnittce of the EZX I3011rd of.
Directo.rs ai1d then to'theU.S. Sect1ritiernncl Exchange.Commission n.nd a.U.S,
Court of Appeals.
7
Fmther> the firm specifically <ind vohmtmily waive$ any right to claim bins or prejt1dgment of the
Chief R<:1gulntoryOfficcr ("CR On); in connection wi.th pnrtic\pntfon in disciissiorts
the imcl copdition-s 9f this A WC, 'Or other t:OllSideration of this A WG, inch1dil')g (lCceptancc
01 rcjection of this A WC.
The finn fm1her specifically and vo'IJ.Jntarily w11ivcs any right to claim p<frsott vfolated tho
()X pnrte prohioit.!911$ ofEZ.X.Rttle 8.16, fa connection with s.uch ..l'J't:tson's oi b't>dts;partlc.ipali'C>ll
in regardil').g the terms. tind.condltforisof\his A WC; 01: 0ther qb11.sidert\tio1J 9f this
A WC, includin1rits acceptance or
III.
OT.HER J'vfAT'.fERS
The.firm understands that;
A.. Sllbmission of this A WC is voluntary ii,nd will .not resolve this m.atter un,i'ess and
until .it has been reviewed and .accepted by 1he CR,O',. p\trsunnt fo .. BzX R\1le
B. If this A WC .is not accepted; its submission will not be \l'sed as evidence to prove
any of the allegations against the firm; and
C. If accepted:
1. this AWC .will become part of tire firm's permanci1t discii)lir'lnl:y record
tllld mny he c;:onsidere<l i.n any foture actio11s.b.r9ugh(by:15Z:X or nny ofher
i:egtf!at.or titm;
2'. this AWC.\iillJ mahitained byBZX in
with BZ:X Rule 8.1 l, Interpretations imd Po'fioies. OJ. In
aqdition, this A WC will be made available through FINRA's publ'i.c
c1isolosu.re pi:omam in response to pi1blic l\bot the fhrn's
disciplinary record; ai1d
3... The fam may not take tiny actio)) or- mnke or pcimit to be made ru1y p.nblic.
stafeine11t, rcg4Jatojy ftlingsor otherwise, :direqtly or


imy in this AWC ot c)eafe the .. the.A WC
is without.factual basis. The firm may not take .. any positioni;1 nny
proceedii1g brought by or on behalf of BZX, oi to which BZX is a pa1ty>
that is iirconsfatent with any part of this AWC. Nothing in this p1ovision
the fim1 (i) obligntions; or (ii) i:ight to take or
factual positions in litignlion or other legal proceediugs in BiX is
not.a party.
8
D. finn mny attuch a Corrective Action Statement to this A WC thnt is a
statement of sleps tnken to prevent futnrc
The fim1 unde1:stands that it nrny 110t denythe.oharges or make'any statement thitt
is inconsistent w.iilt"tlie A WC in Ibis Statement. This Statement does not
consti.tutc foctual or legal findings by BZX, nor does it reflect the of"BZX
or its staff.
9
The undersigned., on behulf of the firm, certifies that n person duly authorized lo net on its
has read and understimds all of the provisions of this A WC nnd hus been given a full opportunity
to nsk questions about it; that it has ngrced to the A provisions voluntarily; and that no
off or, threat, inducement, or promise of nny kind, other than tho terms set forth herein and the
prospect of avoiding the issunnce of u Complaint, has been made to induce the tim1 to submit it.
-
"..ju nc d. , dlo 14
Date
Reviewed by:

Counsel for Respondent \>"' ... 1 tc.'"'' t
Firm Name W1\Mt< c ... i\t.- 1\1-lt. i'Yrv L\.r>
Address \'lJ') M
1
NkJ
City/State/Zip IX. 2ao(,
Phone Number ?.fJ2./
10 .
Citadel Securities LLC

Nnme; Mic
Allfho HAEL .
Title: rlzed $/QnotOIV
Tamarn Schade
Chief Regulutory Officer
BATS Exchange, Inc.
ELECTlON OF PAYMENT FORM
The firm intends to pny the tino proposed in the uitnched Letter of Acccptnnce, Wniver
and Consent by the.: i'c:>llowing method (check one):
0 A firm check or bank check for the full amount; or
"" Wire transfer.
Respectfully submitted,
Respondent
Citndel Securities LLC
20100223345 (Incl. 20120342552, 20120351663, 20 I 1029\33R, 20130375933, 20 I 40402566 nnd 201<10411909) (Ind)
5.27.14
This Corrective Action Statement is submitted by tile Respondent, Citadel Securities LLC
("CDRG'?. It does not co11stit11tefact11al or legalfi111/i11gs hy BZX, nor does it reflect tfte
views of BZX, or its staff.
STATEMENT OF CORRECTIVE ACTION
BY CITADEL SECURITIES LLC
CDRG submits this Statement of Corrective Action in com1ection with the foregoing
Letter of Acceptance, Waiver, and Consent ("A WC") to describe the steps it has taken both
throughout the review period and since to correct and substantially reduce the risk of recurrence
of the issues addressed by the A WC.
The overwhelming majority of the reviews that are the subject of the A WC occurred o.n
CDRG's equity market making and options routing desk, which during the review period
adopted safeguards and a suite of pre-trade controls. The main pre-trade control suite was first
implemented prior to the adoption of SEC Rule l 5c3-5 and enhanced on the firm's own initiative
on approximately a dozen instances both before and after the effective date of the rule. These
enhancements addressed CDRG's observations about the orders that led to clearly erroneot1s
filings and trends. CDRG has continued to monitor and refine its controls and procedures over
time and, specifically as to its suite of pre-trade controls, has made additional enhancements
since the review period to address the stafrs concerns and further reduce the risk that erroneous
customer orders will be executed.
The remaining reviews concern either short-lived issues experienced by CDRG's trading
systems or unforeseen market conditions that caused existing controls not to function as intended
for brief periods. As soon as the activity that was the subject of these reviews was identified,
CDRG took prnmpt action to stop the activity. Following each event, CDRG adopted corrective
measures and enhanced existing safeguards and practices in a manner designed to prevent the
recurrence of the same or similar events.
CDRG also intends to continue to evaluate the effectiveness of its safeguards and
controls both in connection with its undertaking and on an ongoing basis to ensure they remain
appropriate to its operations and fully consistent with applicable regulatory requirements.
ActiveUS 128118086v.I