The United States Financial Industry Regulatory Authority (FINRA) has fined Citadel Securities, a market maker and provider of execution services in U.S. equities, options, government securities, and FX products, for multiple issues with correctly reporting Treasury transactions to the Trade Reporting and Compliance Engine (TRACE).

In particular, from August 2, 2017, through December 8, 2018, Citadel Securities reported 452,451 Treasury transactions to TRACE that it was not required to report. These reports constituted over 14% of the total Treasury reports the firm made. The over-reporting occurred when the firm transferred Treasury securities within its internal accounts because the firm unintentionally removed the logic to prevent these internal transfers from being automatically reported. Therefore, Respondent violated FINRA Rule 6730(a)(5) and 2010.

Also, from July 10, 2017, through October 9, 2019, in 45,638 instances, Citadel Securities failed to append the No Remuneration indicator to TRACE reports for Treasury transactions with an affiliate that were at cost. The firm did not include the No Remuneration indicator because it did not have the necessary logic to automatically code these transactions to include it. Therefore, Respondent violated FINRA Rules 6730(d)(4)(F) and 2010.

The firm discovered the issue in June 2019 prior to being contacted by FINRA and added the necessary logic to include the indicator in October 2019.

Finally, prior to November 2019, Citadel Securities did not have a supervisory system, including written supervisory procedures (WSPs), reasonably designed to achieve compliance with TRACE reporting rules because its supervisory reviews for compliance with TRACE reporting were limited to alerts generated for reporting errors that were incorrect on their face, such as late reports or reports mismatched reports of broker-dealer contra-parties. Thus, if there was an issue that could not be detected through an automatic alert, the firm’s supervisory system would not detect it.

The firm corrected this issue and added supervisory reviews to address the violations described above.

The respondent agrees to a censure and a $275,000 fine, as a part of its settlement with FINRA.