Citadel fined $800,000 by U.S. regulators for trading violations

NEW YORK Tue Aug 5, 2014 7:17pm EDT

NEW YORK Aug 5 (Reuters) - A unit of hedge fund Citadel LLC was fined $800,000 by U.S. regulators in June for failing to prevent erroneous orders from being sent to several stock exchanges over a nearly three-year period.

Citadel failed to properly establish, maintain and enforce a supervisory system to check the accuracy of orders and to reject some orders that were mispriced or duplicated between March 18, 2010, and Jan. 8, 2013, the Financial Industry Regulatory Authority said in a June 12 letter viewed by Reuters on Tuesday.

Citadel did not admit or deny any wrongdoing.

"We take our responsibilities as a market maker very seriously, and continually work to improve our systems and controls," a Citadel spokesman said. "We are committed to taking prompt action when areas of concern are identified."

The sanctions come as regulators clamp down on issues related to automated trading, which dominates the markets and has received greater scrutiny since the release of the Michael Lewis book "Flash Boys: A Wall Street Revolt" on March 31, which claimed the markets are rigged.

Citadel failed to reasonably prevent the transmission of erroneous orders from broker dealers on behalf of retail clients as well as its own proprietary trading desk, to exchanges run by Nasdaq OMX Group, BATS Global Markets and NYSE, which is owned by Intercontinental Exchange Inc, FINRA said.

Of the $800,000 fine, Citadel was ordered to pay $420,000 to Nasdaq, $160,000 to NYSE, $170,000 to BATS, and $50,000 to FINRA. (Reporting by John McCrank; Editing by Leslie Adler)

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