CBOE Fines Merril Lynch Professional Clearing $30,000 for Failure to Report Market-Maker Trading Activity by BestExecution

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									                        BEFORE THE BUSINESS CONDUCT COMMITTEE
                                        OF THE
                    CHICAGO BOARD OPTIONS EXCHANGE, INCORPORATED

______________________________________
                                          )
In the Matter of:                         )
                                          )
Merrill Lynch Professional Clearing Corp. )
Bank of America Tower                     )
One Bryant Park                           )                    File No. 12-0038
Mail Stop: NY1-100-17-01                  )
New York, NY 10036                        )
                                          )
Respondent                                )
______________________________________ )


                        DECISION ACCEPTING OFFER OF SETTLEMENT

This proceeding was instituted by the Business Conduct Committee (the “Committee”) of the Chicago Board
Options Exchange, Incorporated (the “Exchange”) as a result of an investigation by the staff of the
Exchange, which indicated that there was probable cause for finding a violation within the disciplinary
jurisdiction of the Exchange. In accordance with that determination, the Committee directed the issuance of
a Statement of Charges (“Statement of Charges”). Pursuant to Exchange Rule 17.8, the respondent
(“Respondent”), Merrill Lynch Professional Clearing Corp. (“Merrill Pro”), submitted an offer of settlement
(“Offer of Settlement”).

In submitting the Offer of Settlement, the Respondent neither admitted nor denied the violations alleged in
the Statement of Charges.

The Respondent has agreed that the determination of the Committee to accept the Offer of Settlement shall
constitute a final Decision, and, as provided in Exchange Rule 17.8, the Respondent may not seek review
thereof.

The Respondent understands and acknowledges that the Committee’s decision in this matter will become
part of its disciplinary record and may be considered in any future Exchange proceeding.

With due regard to the particulars of this matter, the Committee believes it is appropriate to accept the
Respondent’s Offer of Settlement based on the following stipulated facts and findings and thereby to impose
the sanction specified below.

                                                 FACTS

1. During all relevant periods herein, Merrill Pro was an effective Trading Permit Holder of the CBOE
   Stock Exchange (“CBSX”) that is approved to conduct business as a clearing organization, a Market-
   Maker and a public customer business.

2. During all relevant periods in which the activity noted below occurred, Merrill Pro was acting as a
   registered broker-dealer.
File No. 12-0038


3. During all relevant periods herein, Exchange Rule 8.9 Securities Accounts and Orders of Market-
   Makers, was in full force and effect.

4. Pursuant to CBOE Rule 8.9(b), all Market-Maker trading activity as well as all positions in related
   securities must be reported to the CBOE Stock Exchange (“CBSX”) daily by clearing firms which clear
   market-maker activity.1

5. During the approximate period from in or about November 2010 through in or about January 2012,
   Merrill Pro failed to accurately report to the Exchange certain Market-Maker equity trading activity for
   two CBSX Trading Permit Holders.

                                                     FINDINGS

The acts, practices and conduct described in Paragraph 5 above, constitute violations of Exchange Rule
8.9(b) by Merrill Pro, in that Merrill Pro failed to accurately report to the Exchange certain Market-Maker
equity trading activity for two CBSX Trading Permit Holders.

                                                     SANCTION

The sanction to be imposed shall consist of a $30,000 fine, a censure and an Undertaking to require that
Merrill Pro implement procedures to properly report stock transactions on behalf of its Market-Maker
Customers. The Undertaking is required to be implemented one hundred and twenty (120) calendar days
from the issuance of the Decision in this matter.

                                                       ORDER

ACCORDINGLY IT IS ORDERED THAT, the Respondent, Merrill Lynch Professional Clearing Corp.
shall be and hereby is censured and fined in the amount of thirty thousand dollars ($30,000). In addition, the
BCC ordered an Undertaking to require that Merrill Pro implement procedures to properly report stock
transactions on behalf of its Market-Maker Customers. The Undertaking is required to be implemented one
hundred and twenty (120) calendar days from the issuance of the Decision in this matter.


                                                          SO ORDERED
                                                          FOR THE COMMITTEE


Dated: September 24, 2012                                 By: /s/ Bruce Andrews __
                                                          Bruce Andrews
                                                          Chairman
                                                          Business Conduct Committee




1
    In a manner prescribed by the Exchange, with respect to transactions to be cleared into all accounts carried for
Market-Makers who are the subject of a clearing firm Letter of Guarantee issued pursuant to Rule 8.5, each clearing
firm shall, on the business day following order entry date, report to the Exchange every executed order entered by the
Market-Maker for the purchase or sale of (i) a security underlying options traded on the Exchange or (ii) a security
convertible into or exchangeable for such underlying security or (iii) a security traded on the Exchange (including, with
respect to multiply listed securities, orders sent to another exchange), as well as opening and closing positions in all
such securities held in each such account.


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