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Citadel founder and CEO Kenneth Griffin.
Andrew Harrer | Bloomberg | Getty Images
WASHINGTON — The Securities and Exchange Commission fined Citadel Securities, an investment management firm, $7 million for settling charges of violating order marking requirements, the commission announced Friday.
The SEC estimated that the firm marked millions of certain short sale orders as long sales, and vice versa, from September 2015 through September 2020, according to the commission.
The source of the inaccuracies was a coding error in Citadel’s automated trading system during this time frame, the SEC found.
A Citadel spokesperson told CNBC that the matter “had no impact on the quality of our client execution.”
“While updating our systems to accommodate certain client requests, we made a coding change that inadvertently affected a de minimis percentage of our order markings,” the spokesperson added. “We detected the issue and promptly fixed it more than three years ago.”
Short sales involve borrowing stock from a broker to sell into the market, then buying it back at a cheaper price and returning the borrowed stock to cash in on the price difference, according to Bankrate.
Compliance with order marking requirements “is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” Mark Cave, associate director of the SEC’s Division of Enforcement, said in a statement.
Failures to comply “can have negative downstream consequences on the accuracy of the firm’s electronic records, including its electronic blue sheet reporting, depriving the Commission of important information about the markets it regulates,” Cave added.
The SEC also fined Goldman Sachs on Friday for inaccurate “blue sheet” submissions containing identifying securities trading information.
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