SEC-registered broker-dealer Citadel Securities LLC ("Citadel") agreed to pay $22.6 million to settle SEC charges alleging that Citadel's wholesale market-maker business unit, Citadel Execution Services ("CES"), made misleading statements about how it handled and priced retail customer orders received from broker-dealer clients.
The SEC found that CES made statements to its retail broker-dealer clients that suggested that CES either would internalize a marketable order routed to it by its retail broker-dealer clients or route the order so that it would receive the best price that CES found on the various market data feeds that it monitored and to which it subscribed. The SEC found that the CES statements were materially misleading because at least two of CES's execution algorithms, which determined how such orders were filled, did not operate in this manner. One of the algorithms, known as "FastFill," immediately internalized an order at a price that proved not to be the best price for the order that CES observed on the various market data feeds. The other algorithm, known as "SmartProvide," routed an order to market even though the order had not been priced to obtain the best immediate price that CES had observed.
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