FINRA now fines Citadel Securities for illegal data reporting of tens of billions of equity and option order events.

The fine of $1 million was merely a slap on the wrist.

Citadel Securities LLC has agreed to pay a $1 million fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA).

This settlement stems from the firm’s failure to report data accurately and on time for tens of billions of equity and options order events to the Consolidated Audit Trail (CAT) Central Repository, starting from June 22, 2020, until August 28, 2024.

As a major industry player, Citadel Securities was required to begin reporting its order event data on June 22, 2020.

To comply, the firm developed a proprietary reporting system along with testing processes and supervisory procedures.

However, from the start of its reporting obligations until July 31, 2022, Citadel Securities inaccurately reported data for about 42.2 billion order events, which included 33 different types of reporting errors.

Three primary errors accounted for the majority of these inaccuracies, impacting 41.8 billion events:

1. The firm failed to report a “0” in the “leaves quantity” field for fully canceled orders, affecting 31.2 billion canceled orders from June 22, 2020, to December 31, 2020.
2. It incorrectly applied the “representative eligible” indicator instead of the “representative” indicator for 6.3 billion new orders between June 22, 2020, and April 9, 2021.
3. The “Immediate or Cancel” (IOC) Time-in-Force code was not populated for 4.3 billion IOC order events from June 22, 2020, to February 16, 2022.

In addition to these issues, Citadel Securities reported over 400 million inaccuracies due to the remaining error types and failed to timely report approximately 580 million order events during the same period.

By September 22, 2022, the firm had corrected the 33 error types identified up to July 31, 2022, some of which had persisted for up to two years, per reports.

Citadel Securities submitted corrections for the inaccurate order events and reported the previously unreported order events between one and 17 months after resolving the issues.

After addressing these initial errors, the firm discovered four additional issues that led to the failure to report data for about 3.2 billion equity order events from December 13, 2021, to June 30, 2024.

These issues were resolved by June 30, 2024, with corrections submitted by August 28, 2024.

The violations occurred due to various coding and system problems, issues with third-party data, and the firm’s interpretation of reporting scenarios. Many errors were identified during supervisory reviews.

By failing to report order event data accurately and on time, Citadel Securities violated FINRA Rules 6830, 6893, and 2010.

In addition to the $1 million fine, Citadel Securities will also receive a censure.

This isn’t Citadel’s first time dealing with reporting fraud.

For five years Citadel incorrectly marked short sales as long sales and vice versa according to a September 2023 SEC report.

According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa.

“Compliance with the order marking requirements of Reg SHO is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.

Citadel’s long history of market manipulation has drawn severe scrutiny from Main Street.

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Also Read: FINRA CEO Is Now Under Pressure On The MMTLP Case

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