Broker-dealer Citadel Securities LLC has been cleared of charges by the U.S. Securities and Exchange Commission (SEC) for violating Regulation SHO, a set of rules designed to prevent abusive short selling practises. Broker-dealers are required by the regulation to properly mark sale orders as long, short, or short exempt. Regulators rely heavily on such records to keep track of and stop unauthorised short sales.
Miami-based Citadel Securities has agreed to pay a $7 million fine to resolve the SEC’s allegations. With a focus on stocks, equity options, and interest rate swaps, Citadel Securities LLC is a well-known international market maker.
Because of the company’s dedication to bringing liquidity and transparency to the financial markets, it has become a major participant in the sector.
According to the SEC’s order, Citadel Securities mislabeled millions of orders over a five-year period. Particularly, some short sales and vice versa were incorrectly classified as long sales. An error in the coding of Citadel Securities’ automated trading system was the cause of this difference. As a result, during this time the company informed regulators, such as the SEC, of the inaccurate data.
“Compliance with the order marking requirements of Reg SHO is vital in our regulatory endeavours to clamp down on market malpractices, such as ‘naked’ short selling,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement, in response to the issue. He went on to emphasise the importance of the action against Citadel Securities, pointing out that failure to follow Reg SHO requirements may negatively affect the accuracy of a firm’s computerised records. This could subsequently deprive the Commission of essential market-related information.
Citadel Securities has been charged by the order for breaking Reg SHO Rule 200(g). The business has complied with a cease-and-desist order even though it hasn’t admitted or contested the findings.
This consists of a censure, the previously mentioned $7 million fine, and particular undertakings. A thorough examination of the company’s computer programming and coding logic essential to the processing of relevant transactions is one of these. Another is a written assurance that the coding fault has been fixed.
Seth M. Nadler of the SEC’s Home Office led the investigation on the case with support from several other departments and organisations within the SEC. Overseeing the investigation was Mr. Cave