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1 year ago

CEMM_NQ_2016

CEMM_NQ_2016

Based on the foregoing

Based on the foregoing conduct, Citadel committed the following violations: I. During the review period, as noted above, the firm's On-Open Strategy, in certain instances, traded a high concentration of volume close to the open, but without due care as to the impact of its trading on the NOOP. CEMM's conduct resulted in the firm's failure to meet standards of professional conduct. The conduct described in this paragraph constitutes a violation ofNasdaq Rule 2110. 2. During the review period, as noted above, the firm did not establish and maintain a reasonable system to supervise algorithmic trading strategies developed by the firm and utilized by the firm's Proprietary Trading Desk ("algo strategies"). In particular, the firm's supervisory system failed to reasonably supervise the development, testing, implementation, and operation ofalgo strategies as described above. The firm's supervisory system also failed to have adequate written supervisory procedures to govern the development, testing, implementation and operation of algo strategies. Specifically, the firm's supervisory system did not provide for:(!) the identification of the person(s) responsible for supervision; (2) a statement of the supervisory step(s) to be taken by the identified person(s); (3) a statement as to how often such person(s) should take such step(s); and (4) a statement as to how the completion of the step(s) included in the written supervisory procedures should be documented. The conduct described in this paragraph constitutes a violation ofNasdaq Rules 2110 and 3010. 3. From February 2008 through December 2009, the firm did not retain email messages and other communications created and received by an associated person, the quantitative researcher who developed the On-Open Strategy. The conduct described in this paragraph constitutes a violation of SEC Rule 17a-4 and Nasdaq Rule 3110. B. The firm also consents to the imposition of the following sanctions: A censure, a fine of$1,000,000 ($475,000 for violations of just and equitable principles of trade, $475,000 for supervision deficiencies, and $50,000 for violations of books and records rules), and an undertaking to revise the firm's written supervisory procedures with respect to the areas described in paragraph 2 above. Within 30 business days of acceptance of this A WC by the NAC, a senior officer of the Respondent shall submit to the COMPLIANCE ASSISTANT, LEGAL SECTION, MARKET REGULATION DEPARTMENT, 9509 KEY WEST A VENUE, ROCKVILLE, MD 20850, a signed, dated letter, or an e-mail from a work-related account of the senior officer to MarketRegulationComp@finra.org. providing the following information: (1) a reference to this matter; (2) a representation that the firm has revised its written supervisory procedures to address the deficiencies described in this paragraph; and, (3) the date the revised procedures were implemented. The firm agrees to pay the monetary sanction(s) in accordance with its executed Election of Payment Form. 20100235180,(RJB) 4

The firm 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 FINRA staff. II. WAIVER OF PROCEDURAL RIGHTS The firm specifically and voluntarily waives the following rights granted under Nasdaq's Code of 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 the allegations 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; and D. To appeal any such decision to the Nasdaq Review Council and then to the U.S. Securities and Exchange Commission and a U.S. Court of Appeals. Further, the firm specifically and voluntarily waives any right to claim bias or prejudgment of the Chief Regulatory Officer, the Nasdaq Review Council, or any member of the Nasdaq Review Council, in connection with such person's or body's participation in discussions regarding the terms and conditions of this A WC, or other consideration of this A WC, including acceptance or rejection of this A WC. The firm 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 and conditions of this A WC, or other consideration of this A WC, including its acceptance or rejection. The firm understands that: III. OTHER MATTERS A. Submission of this AWC is voluntary and will not resolve this matter unless and until it has been reviewed and accepted by FINRA's Department of Market 20100235180,(RJB) 5

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