Follow-Up Update: Citadel Securities Fined $1 Million by FINRA After Failing to Accurately Report 42.2 Billion Order Events
Citadel Securities LLC has agreed to pay a $1 million fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA) following a prolonged failure to meet its Consolidated Audit Trail (CAT) reporting obligations. Between June 22, 2020, and August 28, 2024, Citadel Securities repeatedly failed to timely and accurately report tens of billions of equity and options order events to the CAT Central Repository, violating several FINRA rules.
Key Reporting Failures
Citadel Securities, as a large industry member, was required to begin reporting its order event data to CAT on June 22, 2020. The firm developed a proprietary system and supervisory procedures for compliance, but multiple errors plagued the system. The most significant issues occurred between June 2020 and July 2022, when Citadel inaccurately reported data on approximately 42.2 billion equity and option order events, with 33 unique error types contributing to the problem.
Three major errors were responsible for the bulk of the inaccurate reports:
1. Failure to Report “0” for Canceled Orders: Between June 2020 and December 2020, Citadel did not report “0” in the "leaves quantity" field for fully canceled orders, leading to errors in 31.2 billion order events.
2. Incorrect Use of Indicators: From June 2020 to April 2021, the firm applied the wrong "representative eligible" indicator to 6.3 billion new order events.
3. Omission of Immediate or Cancel (IOC) Code: For 4.3 billion order events, Citadel failed to report the IOC Time-in-Force code from June 2020 to February 2022.
The firm also reported over 400 million inaccurate order events due to 30 additional error types and delayed reporting of 580 million equity and options order events between June 2020 and July 2022.
Remediation Efforts
Citadel Securities addressed these errors by September 2022, after some issues persisted for nearly two years. The firm submitted corrections for the 42.2 billion inaccurate events and reported the previously delayed 580 million order events, often with delays ranging from one to 17 months.
However, after fixing the initial 33 errors, Citadel identified four more issues between December 2021 and June 2024, impacting 3.2 billion equity order events. These additional errors were corrected by June 2024, with corrections submitted by August 28, 2024.
Causes and Consequences
The reporting violations were attributed to a mix of coding issues, flawed third-party data, and incorrect interpretations of reporting scenarios. Despite its supervisory reviews, Citadel failed to prevent these errors from affecting its CAT reporting.
For violating FINRA Rules 6830, 6893, and 2010, Citadel Securities was fined $1 million and issued a censure, emphasizing the importance of accurate and timely reporting in ensuring market transparency and accountability.
This settlement marks another significant enforcement action aimed at improving compliance with industry-wide reporting obligations.
----> https://files.brokercheck.finra.org/firm/firm_116797.pdf <----