ADMINISTRATIVE PROCEEDING
File No. 3-21648

The Securities and Exchange Commission today announced settled charges against Chicago-based registered broker-dealer Simplex Trading, LLC ("Simplex") for violations of Rule 203(b)(1) of Regulation SHO in connection with its proprietary options trading.

According to the SEC's Order, from at least October 2018 through December 2020, Simplex violated Regulation SHO by engaging in opportunistic, proprietary options trading and executing short sales of millions of shares of the underlying stocks to hedge that trading without locating shares of those stocks to borrow in improper reliance upon the bona-fide market making exception to the locate requirement set forth in Regulation SHO. As described in the order, Simplex did not qualify for the bona-fide market making exception to the locate requirement because Simplex was not engaged in bona-fide options market making activity at the time of its short sales in the underlying stock. In particular, the order finds, Simplex did not post continuous options quotations at or near both sides of the market and incurred limited economic or market risk because its options quotes were very rarely at or near the national best bid and offer. In addition, the order finds that Simplex's short selling in the underlying stock was not bona-fide market making because it was done to hedge Simplex's speculative, proprietary options trading strategies.

The SEC's order finds that Simplex willfully violated Rule 203(b)(1) of Regulation SHO. Without admitting or denying the SEC's findings, Simplex agreed to a cease-and-desist order, a censure and to pay a civil money penalty of $200,000.

The SEC's investigation was conducted by Jamie Davidson and supervised by Anne C. McKinley of the SEC's Chicago Regional Office. Michael Marren, Terry Moran, and Ilan Felix of the SEC's Division of Examinations, and Michael Barnes and Su Li of the SEC's Division of Economic Analysis assisted with the investigation.