NYSE ARCA, INC. Appearances. For the Complainant: Catherine Lifeso, Esq. and Adam J. Wasserman, Esq., NYSE Regulation.

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1 NYSE ARCA, INC. NYSE REGULATION, v. STUDENT OPTIONS, LLC, Complainant, Respondent. Proceeding No December 16, 2016 Respondent violated (1) NYSE Arca Options Rule 6.75 by failing to execute 37 orders in option contracts against other orders on the Consolidated Book that represented the Arca Best Bid and Offer; (2) NYSE Arca Options Rules 6.75 and/or 6.94 by improperly effecting 27 transactions in option series at prices that were inferior to the National Best Bid and Offer and/or the Arca Best Bid and Offer; (3) NYSE Arca Options Rule 6.46(a) by failing to use due diligence to execute 5 options orders at the best prices available ; and (4) NYSE Arca Options Rule 11.1(b) by failing to adhere to the principles of good business practice in the conduct of its business affairs by adjusting the price on a trade after execution by mutual agreement of the parties in order to avoid the request for a fill made by a customer on the Consolidated Book whose order was entitled to receive priority of execution. Consent to a censure and a $17,500 fine. Appearances For the Complainant: Catherine Lifeso, Esq. and Adam J. Wasserman, Esq., NYSE Regulation. For the Respondent: Jill Student, Chief Compliance Officer, Student Options, LLC. DECISION A Hearing Officer at the Financial Industry Regulatory Authority ( FINRA ) considered an Offer of Settlement and Consent entered into between NYSE Arca, Inc. and Student Options, LLC ( Firm ). 2 1 This proceeding includes matter numbers , , , , , , , , , , , and

2 Student Options, LLC submitted the Offer of Settlement and Consent for the sole purpose of settling this disciplinary proceeding, without adjudication of any issues of law or fact, and without admitting or denying any allegations or findings referred to in the offer of settlement. The Hearing Officer accepts the Offer of Settlement and Consent and issues this Decision in accordance with NYSE Arca Options Rules. 3 FINDINGS OF FACTS AND VIOLATIONS Overview 1. The Firm violated (1) NYSE Arca Options Rule 6.75 by failing to execute 37 orders in option contracts against other orders on the Consolidated Book that represented the Arca Best Bid and Offer ( ABBO ), and thus were entitled to receive priority of execution; (2) NYSE Arca Options Rules 6.75 and/or 6.94 by improperly effecting 27 transactions in option series at prices that were inferior to the National Best Bid and Offer ( NBBO ) and/or ABBO; (3) NYSE Arca Options Rule 6.46(a) by failing to use due diligence to execute 5 options orders at the best prices available during the period of January 2013 through October 2016 ( Review Period ); and (4) NYSE Arca Options Rule 11.1(b) by failing to adhere to the principles of good business practice in the conduct of its business affairs by adjusting the price on a trade after execution by mutual agreement of the parties in order to avoid the request for a fill made by a customer on the Consolidated Book whose order was entitled to receive priority of execution. Background and Jurisdiction 2. The Firm became registered as an Options Trading Permit Holder ( OTP Holder ) with NYSE Arca, Inc. ( Exchange ) on January 16, The Firm has both a floor and an off-floor presence on all primary United States options exchanges. 3. This matter arises in part from referrals to NYSE Regulation by FINRA s Department of Market Regulation. On behalf of the Exchange, the Options Regulation staff of Market Regulation conducted Floor Broker Trade Through and Customer Priority reviews during the Review Period. 4. By letters dated August 2, 2016, August 3, 2016, September 23, 2016, November 2, 2016, and November 11, 2016, NYSE Regulation notified the Firm that it was investigating further whether the Firm violated NYSE Arca Options Rules 6.75, 6.94, and FINRA s Office of Hearing Officers reviewed the Offer of Settlement and Consent under the terms of a Regulatory Services Agreement (as amended) among NYSE Group, Inc., New York Stock Exchange LLC, NYSE Arca, Inc., NYSE MKT LLC, and FINRA. 3 The facts, allegations, and conclusions contained in this Decision were taken from the executed Offer of Settlement and Consent. 2

3 Violations 5. NYSE Arca Options Rule 6.75 provided from January 2013 through October 1, 2014, 4 that with respect to the priority of options orders executed in open outcry, the highest bid and lowest offer have priority, but where two or more bids or offers for the same option contract represent the highest or lowest price and one such bid or offer is displayed in the Consolidated Book, 5 such bid or offer (i.e., the ABBO) shall have priority over any other bid or offer at the post. 6. NYSE Arca Options Rule 6.75 provided from October 2, 2014, through the end of the Review Period, that with respect to the priority of options orders executed in open outcry, the highest bid and lowest offer have priority, but where two or more bids or offers for the same option contract represent the highest or lowest price and one such bid or offer is for the account of a Customer displayed on the Consolidated book, such Customer bid or offer and any non-customer bids or offers on the Consolidated Book ranked ahead of such Customer bid shall have priority over any other bid at the post; however, if two or more bids or offers represent the highest or lowest price, respectively, and a Customer bid or offer displayed on the Consolidated Book is not involved, priority shall be afforded to such bids or offers in the sequence in which they are made. 7. During the Review Period, NYSE Arca Options Rule 6.94 provided that, [a]bsent reasonable justification and during normal market conditions, OTP Holders and OTP Firms should not effect Trade-Throughs. A Trade-Through is defined in NYSE Arca Options Rule 6.92(a)(17) as a transaction in an option series at a price that is lower than a Protected Bid or higher than a Protected Offer. 8. During the Review Period, NYSE Arca Options Rule 6.46(a) required Floor Brokers to use due diligence to execute orders at the best prices available. 9. During the Review Period, NYSE Arca Options Rule 11.1(b) required every OTP Holder, OTP Firm, and all associated persons thereof at all times to adhere to the principles of good business practice in conduct of its or their business affairs. 10. In 37 transactions executed during the Review Period, one or more Floor Brokers employed at the Firm failed to execute orders in option contracts against other orders on the Consolidated Book that represented the ABBO, and thus were entitled to receive priority of execution. This conduct constitutes separate and distinct violations of NYSE Arca Options Rule This rule was amended as of October 21, As set forth in NYSE Arca Options Rule 6.1(b)(37), the Consolidated Book is the Exchange s electronic book of limit orders for the accounts of Public Customers and broker-dealers, and Quotes with Size. 3

4 11. In 27 transactions executed during the Review Period, one or more Floor Brokers employed at the Firm improperly traded-through the NBBO and/or ABBO by effecting customer transactions in an option series at prices that were inferior to the NBBO and/or ABBO. This conduct constitutes separate and distinct violations of NYSE Arca Options Rules 6.94 and/or For 5 of the transactions discussed above, one or more Floor Brokers employed at the Firm failed to use due diligence to execute orders at the best prices available. This conduct constitutes separate and distinct violations of NYSE Arca Options Rule 6.46(a). The Firm offered and/or paid a total of $5,034 in restitution to address the violations of NYSE Arca Options Rule For one transaction discussed above, one or more Floor Brokers employed at the Firm executed the transaction and subsequently adjusted the price, by mutual agreement of the parties, in order to avoid the request for a fill made by a customer on the Consolidated Book whose order was entitled to receive priority of execution. This conduct constitutes a violation of NYSE Arca Options Rule 11.1(b). Relevant Disciplinary History 14. On July 29, 2014, the Firm was issued a Cautionary Action Letter for violating NYSE Arca Rules 6.75 and/or 6.94 on nine occasions during the periods April through September 2012 and January through September See In the Matter of Student Options, Matter Nos , (July 29, 2014). Respondent Student Options LLC violated: ORDER 1. NYSE Arca Options Rule 6.75 by failing to execute 37 orders in option contracts against other orders on the Consolidated Book that represented the ABBO, and thus were entitled to receive priority of execution; 2. NYSE Arca Options Rules 6.75 and/or 6.94 by improperly effecting 27 transactions in option series at prices that were inferior to the NBBO and/or the ABBO; 3. NYSE Arca Options Rule 6.46(a) by failing to use due diligence to execute 5 options orders at the best prices available during the period of January 2013 through October 2016; and 4. NYSE Arca Options Rule 11.1(b) by failing to adhere to the principles of good business practice in the conduct of its business affairs by adjusting the price on a trade after execution by mutual agreement of the parties in order to avoid the request for a fill made by a customer on the Consolidated Book whose order was entitled to receive priority of execution. 4

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