RBC Capital Markets, LLC has agreed to pay a fine of $90,000 as a part of a settlement with Cboe Exchange. RBC neither admits nor denies that violations of Exchange Rules have been committed.

On September 17, 2019, at 10:33:24 a.m., RBC, by and through an Associated Person employed by RBC as a trader on RBC’s Global Equity Derivatives Flow Trading Desk, received an order to sell 40,000 VIX 18SEP19 18 call options for six cents and to buy a 20,000 VIX 16OCT19 22-23 call spread for 12 cents. The customer asked, and the trader agreed, to attempt to execute the order at seven cents for the September 18 calls and at 12 cents for the October 22-23 call spread.

Between 10:37:13 a.m. and 10:37:58 a.m., the trader communicated the customer’s order to a broker at a price of seven cents for the September 18 calls and a price of 12 cents for the October 22-23 call spread. The trader also told the broker that RBC was “committed at a level better” to its customer than the price the trader had communicated to the broker.

Between 10:41:42 a.m. and 10:42:15 a.m., the broker communicated to the trader that the broker had spoken with at least three counterparties about the customer’s order. At 10:42:47 a.m., the trader communicated to the customer that the seven cent price on the September 18 calls and the 12 cent price on the October 22-23 call spread were “not working” and that he was going to use the price at which he was originally committed.

At 10:44:11 a.m., prior to disclosing the six cent price of the customer order to the marketplace, the trader traded for RBC’s proprietary account in the same options class to hedge RBC’s anticipated facilitation of the customer order by executing an order to sell 15,000 VIX 18SEP19 19 call options against a bid resting in the Cboe electronic order book.

The trader, on behalf of RBC, then announced the six cent price of the customer’s order to the trading crowd at 10:44:44 a.m., and the customer’s order was fully executed by 10:59:27 a.m. RBC, by and through its Associated Person, thereby engaged in an anticipatory hedging transaction.

These acts, practices, and conduct constitute a violation of Exchange Rules 4.1 and 6.9 by RBC in that the firm, by and through its Associated Person, entered an order in the same options class prior to the public disclosure of the original customer order’s terms and conditions.

On top of the $90,000 fine, the firm has agreed to a censure.