VIRTU FINANCIAL GLOBAL MARKETS LLC
EXCHANGE RULE VIOLATIONS:
RULE 432. GENERAL OFFENSES (in part)
It shall be an offense:
Q. to commit an act which is detrimental to the interest or welfare of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange;
W. for a Member to fail to diligently supervise its employees and agents in the conduct of their business relating to the Exchange.
Pursuant to an offer of settlement in which Virtu Financial Global Markets, LLC (“Virtu”) neither admitted nor denied the findings, conclusions, or rule violations upon which the penalty is based, on March 12, 2020, a Panel of New York Mercantile Exchange (“NYMEX”) Business Conduct Committee (“Panel”) found that on June 12, 2018, over a period of approximately one minute, Virtu sent a large volume of non-actionable Transmission Control Protocol Acknowledgement (“TCP”) messages to a Market Segment Gateway (“MSGW”) used for NYMEX Energy Futures products, resulting in latencies of over one second to other market participants. The CME Group Global Command Center notified Virtu about the message traffic. On June 18, 2018, Virtu sent another large volume of non-actionable TCP messages to the same MSGW over a period of approximately one second. This second incident caused latencies of over one second to a larger group of market participants than the first incident on June 12, 2018.
The Panel found that the malfunction was caused by an error in a modified version of an existing application introduced on June 8, 2018. The modification was intended to safely disconnect the system following a certain volume of order cancellations. In implementing a fix to this modified software following the June 12, 2018 incident, Virtu inadvertently triggered the second incident on June 18, 2018 when the system was taken out of production and pending orders were cancelled. Virtu did not take sufficient steps when it took the system out of production to ensure that the issue did not recur. The Panel thus concluded that Virtu thereby violated Exchange Rules 432.Q. and 432.W.
In accordance with the settlement offer, the Panel ordered Virtu to pay a fine to the Exchange in the amount of $65,000.