FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`INDEX NO. 652468/2020
`RECEIVED NYSCEF: 02/25/2022
`RECEIVED NYSCEF: 02/25/2022
`
`
`
`
`
`EXHIBIT “7”
`EXHIBIT “7”
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`ATTORNEY
`INVESTOR
`
`GENERAL
`PROTECTION
`
`OF THE STATE
`BUREAU
`
`OF NEW YORK
`
`In the Matter
`
`of
`
`Investigation
`
`Attorney
`
`by BARBARA
`General
`of
`the State
`
`D. UNDERWOOD,
`of New York,
`
`of
`
`Credit
`
`Suisse
`
`Securities
`
`(USA)
`
`LLC
`
`No.
`
`18-105
`
`SETTLEMENT
`
`AGREEMENT
`
`The Office
`
`of
`
`the Attorney
`
`General
`
`of
`
`the State
`
`of New York
`
`("OAG")
`
`commenced
`
`an
`
`investigation
`
`pursuant
`
`to Article
`
`23-A
`
`of
`
`the General
`
`Business
`
`Law ("GBL")
`
`of New York
`
`(the
`
`"Martin
`
`Act")
`
`and Section
`
`63(12)
`
`of
`
`the Executive
`
`Law
`
`of New York
`
`concerning
`
`Credit
`
`Suisse
`
`Securities
`
`(USA)
`
`LLC's
`
`("Credit
`
`Suisse")
`
`Retail
`
`Execution
`
`Services
`
`business
`
`(the
`
`"Investigation").
`
`This
`
`Settlement
`
`Agreement
`
`("Agreement")
`
`contains
`
`the findings
`
`of OAG's
`
`Investigation
`
`and the relief
`
`agreed
`
`to by OAG and Credit
`
`Suisse,
`
`whether
`
`acting
`
`through
`
`its
`
`the
`
`directors,
`
`officers,
`
`employees,
`
`representatives,
`
`agents,
`
`affiliates,
`
`or subsidiaries
`
`(collectively,
`
`"Parties").
`
`Credit
`
`Suisse
`
`neither
`
`admits
`
`nor denies
`
`OAG's
`
`findings.
`
`OAG's
`
`FINDINGS
`
`INTRODUCTION
`
`1.
`
`Broker-dealers
`
`that
`
`execute
`
`orders
`
`for
`
`retail
`
`customers
`
`often
`
`send
`
`such
`
`orders
`
`to
`
`other
`
`broker-dealers
`
`that
`
`specialize
`
`in handling
`
`such
`
`order
`
`flow.
`
`Between
`
`mid-2011
`
`and March
`
`2015
`
`(the
`
`"Relevant
`
`Period"),
`
`Credit
`
`Suisse
`
`operated
`
`a wholesale
`
`market
`
`making
`
`desk
`
`called
`
`Retail
`
`Execution
`
`Services
`
`("RES")
`
`in order
`
`to execute
`
`this
`
`type
`
`of order
`
`flow.
`
`During
`
`this
`
`period,
`
`RES executed
`
`both
`
`"held"
`
`and "not
`
`held"
`
`equity
`
`orders
`
`for
`
`its retail
`
`broker-dealer
`
`customers,
`
`Page
`
`1 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`including
`
`over
`
`15 million
`
`held
`
`retail-originated
`
`equity
`
`orders
`
`(over
`
`8.5 billion
`
`shares)
`
`having
`
`a
`
`total market
`
`value
`
`of approximately
`
`$227
`
`billion.
`
`Held
`
`orders
`
`that
`
`are marketable
`
`orders
`
`(either
`
`market
`
`orders,
`
`or buy
`
`(sell)
`
`limit
`
`orders
`
`whose
`
`limit
`
`price
`
`is at or above
`
`(below)
`
`the current
`
`market
`
`price) must
`
`be executed
`
`immediately
`
`(i.e.,
`
`there
`
`is no price
`
`or
`
`time
`
`discretion),
`
`whereas
`
`not held
`
`orders
`
`do not
`
`require
`
`execution
`
`and provide
`
`with
`
`respect
`
`to price
`
`and time
`
`of
`
`immediate
`
`flexibility
`
`execution.
`
`Beginning
`
`in mid-2011
`
`and continuing
`
`until March
`
`2015,
`
`when
`
`RES closed,
`
`RES
`
`made material
`
`misrepresentations
`
`and omissions
`
`concerning
`
`its handling
`
`of held
`
`retail
`
`equity
`
`orders,
`
`in violation
`
`of
`
`the Martin
`
`Act
`
`and Executive
`
`Law § 63(12).
`
`2.
`
`RES sought
`
`to differentiate
`
`itself
`
`by marketing
`
`its access
`
`to
`
`"vast"
`
`dark
`
`liquidity
`
`in Credit
`
`Suisse's
`
`own
`
`alternative
`
`trading
`
`system
`
`("ATS")
`
`and dark
`
`pool,
`
`as well
`
`as RES's
`
`access
`
`to dark
`
`pools
`
`operated
`
`by other
`
`broker-dealers.
`
`Dark
`
`pools
`
`are markets
`
`in which
`
`bids
`
`and offers
`
`are not
`
`visible
`
`to market
`
`participants,
`
`unlike
`
`displayed
`
`exchanges
`
`and markets
`
`(i.e.
`
`"lit markets")
`
`where
`
`bids
`
`and offers
`
`are visible.
`
`During
`
`the Relevant
`
`Period,
`
`RES represented
`
`in its marketing
`
`materials
`
`that RES offered
`
`"eilliaiiced
`
`liquidity"
`
`by accessing
`
`internal
`
`and external
`
`pools
`
`of
`
`liquidity,
`
`including
`
`access
`
`to Credit
`
`Suisse's
`
`own
`
`and other
`
`dark
`
`pools.
`
`However,
`
`between
`
`September
`
`2011
`
`and December
`
`2012,
`
`RES executed
`
`only
`
`a de minimis
`
`number
`
`of held
`
`orders
`
`(unlike
`
`not held
`
`orders)
`
`in dark
`
`pools.
`
`3.
`
`RES
`
`further
`
`in its Order
`
`Guide
`
`that
`
`for
`
`represented
`
`Handling
`
`opportunities
`
`"robust"
`
`"enhanced"
`
`and
`
`price
`
`improvement
`
`was
`
`one of
`
`the
`
`"core"
`
`clements
`
`of RES's
`
`approach
`
`to executing
`
`orders.
`
`Providing
`
`a better
`
`price
`
`than
`
`the currently
`
`quoted
`
`best bid
`
`or ask price
`
`is
`
`commonly
`
`referred
`
`to as "price
`
`improvement."
`
`Although
`
`RES described
`
`the factors
`
`relevant
`
`to
`
`the securities
`
`for which
`
`it would
`
`provide
`
`price
`
`improvement,
`
`it did
`
`not disclose
`
`that
`
`a subset
`
`of
`
`orders
`
`for which
`
`execution
`
`quality
`
`was
`
`not
`
`included
`
`in publicly
`
`reported
`
`execution
`
`quality
`
`Page
`
`2 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`reports
`
`pursuant
`
`to Securities
`
`and Exchange
`
`Commission
`
`Rule
`
`605
`
`("non-605"
`
`orders)
`
`typically
`
`would
`
`not
`
`receive
`
`any
`
`price
`
`improvcment.
`
`The RES computer
`
`code
`
`automated
`
`the decision-
`
`making
`
`about
`
`whether
`
`or not a particular
`
`order would
`
`receive
`
`price
`
`improvement
`
`from
`
`RES.
`
`To
`
`distinguish
`
`between
`
`Rule
`
`605
`
`eligible
`
`orders
`
`and non-605
`
`orders,
`
`the RES computer
`
`code
`
`included
`
`a function
`
`called
`
`"CountsForStats."
`
`If
`
`the order
`
`had Rule
`
`605-like
`
`characteristics,
`
`it
`
`was
`
`eligible
`
`and
`
`in most
`
`cases
`
`did
`
`improvement
`
`from RES.
`
`If
`
`for,
`
`in fact,
`
`receive
`
`price
`
`the
`
`order
`
`did not have
`
`those
`
`characteristics,
`
`it
`
`typically
`
`did
`
`not
`
`receive
`
`price
`
`improvement
`
`from
`
`RES
`
`(although
`
`RES would
`
`have
`
`generally
`
`passed
`
`through
`
`to the customer
`
`any
`
`price
`
`improvement
`
`that
`
`the executing
`
`venue
`
`provided).
`
`RES's
`
`marketing
`
`documents
`
`listed
`
`certain
`
`factors
`
`that
`
`the
`
`RES trading
`
`code
`
`used
`
`in making
`
`price
`
`improvement
`
`decisions,
`
`but an order's
`
`Rule
`
`605
`
`status
`
`was
`
`not
`
`included
`
`in that
`
`list of
`
`factors.
`
`4.
`
`RES
`
`stated
`
`that
`
`it would
`
`seek
`
`in its Order
`
`Handling
`
`Guide
`
`to execute
`
`customer
`
`orders
`
`at
`
`the "most
`
`favorable
`
`terms
`
`reasonably
`
`available."
`
`RES
`
`also
`
`represented
`
`in its Order
`
`Handling
`
`Guide
`
`that when
`
`RES commits
`
`capital,
`
`"[t]he
`
`benefit
`
`to our
`
`customer
`
`is a fill without
`
`market
`
`impact.
`
`The more
`
`liquidity
`
`we offer,
`
`the
`
`less
`
`impact
`
`a customer's
`
`order
`
`will
`
`have
`
`on the
`
`NBBO
`
`[i.e.,
`
`the National
`
`Best Bid
`
`and Offer],
`
`potentially
`
`avoiding
`
`price
`
`dis-improvement."
`
`5.
`
`Despite
`
`these
`
`statements,
`
`between
`
`February
`
`2013
`
`and March
`
`2015,
`
`for
`
`certain
`
`RES used
`
`that
`
`sent
`
`an order
`
`orders,
`
`a routing
`
`tactic
`
`only
`
`to lit markets
`
`(referred
`
`to herein
`
`as
`
`"Routing
`
`Tactic
`
`A"),
`
`without
`
`first
`
`attempting
`
`to fill
`
`the order
`
`in Credit
`
`Suisse's
`
`and other
`
`dark
`
`pools
`
`and electronic
`
`liquidity
`
`providers
`
`("ELPs").
`
`RES
`
`applied
`
`Routing
`
`Tactic
`
`A
`
`disproportionally
`
`often
`
`to non-605
`
`orders
`
`(identified
`
`using
`
`the
`
`"CountsForStats"
`
`function)
`
`that
`
`were
`
`larger
`
`than
`
`(i.e.,
`
`"outsized")
`
`the number
`
`of shares
`
`displayed
`
`at
`
`the then-prevailing
`
`market
`
`price,
`
`and thus
`
`had the potential
`
`to cause market
`
`impact.
`
`Outsized
`
`non-605
`
`orders
`
`that RES
`
`Page
`
`3 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`executed
`
`using
`
`Routing
`
`Tactic
`
`A generally
`
`created
`
`a greater
`
`market
`
`impact
`
`and therefore
`
`received
`
`a less
`
`favorable
`
`overall
`
`execution
`
`price
`
`than
`
`orders
`
`executed
`
`with
`
`other
`
`routing
`
`tactics
`
`that RES
`
`used.1
`
`RES's
`
`use of Routing
`
`Tactic
`
`A provided
`
`RES
`
`an opportunity
`
`to profit
`
`from,
`
`or
`
`"capture,"
`
`market
`
`impact
`
`if
`
`there was post-trade
`
`price
`
`reversion,
`
`in which
`
`stock
`
`prices
`
`that
`
`have
`
`been
`
`temporarily
`
`displaced
`
`as a result
`
`of market
`
`activity
`
`may
`
`revert
`
`toward
`
`the
`
`original
`
`price
`
`level.
`
`The
`
`frequency
`
`with which
`
`RES used Routing
`
`Tactic
`
`A for
`
`certain
`
`outsized
`
`orders
`
`was
`
`not
`
`disclosed
`
`in RES's
`
`marketing
`
`materials.
`
`FACTS
`
`A.
`
`Respondent
`
`6.
`
`Credit
`
`Suisse,
`
`a registered
`
`broker-dealer,
`
`is a Delaware
`
`limited
`
`liability
`
`ceiiipally
`
`with
`
`headquarters
`
`New York.
`
`Credit
`
`Suisse
`
`is a wholly-owned
`
`of Credit
`
`in New York,
`
`subsidiary
`
`Suisse Group
`
`AG.
`
`7.
`
`Between
`
`mid-2011
`
`and March
`
`2015,
`
`Credit
`
`Suisse
`
`operated
`
`a New York-based
`
`wholesale
`
`market
`
`making
`
`business
`
`called
`
`Retail
`
`Execution
`
`Services,
`
`which
`
`executed
`
`retail-
`
`originated
`
`orders
`
`in equity
`
`securities
`
`sent by other
`
`broker-dealers.
`
`In March
`
`2015,
`
`Credit
`
`Suisse
`
`closed
`
`RES, which
`
`was generally
`
`not profitable.
`
`B. Background
`
`8.
`
`RES received
`
`customer
`
`orders
`
`on either
`
`a
`
`"held"
`
`or a "not
`
`held"
`
`basis.
`
`Held
`
`orders
`
`that
`
`are marketable
`
`must
`
`be immediately
`
`executed
`
`at
`
`the then-prevailing
`
`market
`
`price
`
`(i.e.,
`
`there
`
`is
`
`no price
`
`or
`
`time
`
`discretion),
`
`whereas
`
`not held
`
`orders
`
`allow
`
`for
`
`price
`
`and time
`
`discretion.
`
`For both
`
`held
`
`and not held
`
`orders,
`
`the executing
`
`broker-dealer
`
`generally
`
`has discretion
`
`to select
`
`the routing
`
`This document
`NBBO.
`prevailing
`
`does not
`
`reflect or constitute
`
`any finding
`
`that RES executed
`
`any orders outside
`
`of
`
`the then-
`
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`
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`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`strategy,
`
`including
`
`the venues
`
`to which
`
`the orders
`
`are routed,
`
`but must
`
`do so in a manner
`
`consistent
`
`with
`
`its representations.
`
`Some RES customers
`
`sent
`
`to the RES desk
`
`both
`
`held
`
`and not
`
`held
`
`orders,
`
`while
`
`other
`
`customers
`
`sent only
`
`held
`
`or not held
`
`orders.
`
`9.
`
`The RES desk
`
`executed
`
`order
`
`flow
`
`on either
`
`a
`
`"principal"
`
`basis
`
`or a "riskless
`
`principal"
`
`basis.
`
`In a principal
`
`execution,
`
`also
`
`referred
`
`to as
`
`"intemalization,"
`
`RES took
`
`a
`
`position
`
`with
`
`risk
`
`to the customer.
`
`proprietary
`
`by either
`
`buying
`
`from or selling
`
`In a riskless
`
`principal
`
`execution,
`
`RES also
`
`bought
`
`from or sold
`
`to a customer,
`
`but RES did
`
`not
`
`take
`
`on any
`
`meaningful
`
`risk
`
`because
`
`RES, with
`
`a customer
`
`order
`
`in hand,
`
`first
`
`obtained
`
`the position
`
`in the
`
`marketplace
`
`(e.g.,
`
`by trading
`
`principally
`
`on lit markets
`
`or
`
`in a dark
`
`pool),
`
`and then
`
`provided
`
`a
`
`corresponding
`
`execution
`
`to its customer
`
`at
`
`the same
`
`price
`
`(or better).
`
`RES executed
`
`held
`
`customer
`
`orders
`
`in one of
`
`three ways:
`
`as principal
`
`to fill
`
`the entire
`
`(i) RES traded
`
`order;
`
`(ii) RES
`
`executed
`
`the entire
`
`order
`
`on a riskless
`
`principal
`
`basis;
`
`or
`
`(iii)
`
`RES executed
`
`some
`
`of
`
`the order
`
`on a principal
`
`basis
`
`and some
`
`on a riskless
`
`principal
`
`basis
`
`(referred
`
`to herein
`
`as "split
`
`fills").
`
`10.
`
`For
`
`the held
`
`orders
`
`at
`
`issue, RES did
`
`not
`
`charge
`
`customers
`
`commissions
`
`or
`
`markups,
`
`and
`
`instead
`
`sought
`
`to profit
`
`from its principal
`
`trading.
`
`RES considered
`
`two
`
`elements
`
`of
`
`potential
`
`profit:
`
`spread
`
`capture
`
`the difference
`
`between
`
`(i)
`
`(i.e.,
`
`capturing
`
`the bid
`
`and ask
`
`for a
`
`security
`
`at
`
`the time
`
`the order was
`
`received);
`
`and (ii)
`
`impact
`
`capture
`
`(as set
`
`forth
`
`below).
`
`RES also
`
`considered
`
`the potential
`
`risk
`
`associated
`
`with
`
`intemalizing
`
`all or part
`
`of
`
`the order.
`
`1 1.
`
`The RES desk
`
`executed
`
`over
`
`15 million
`
`held
`
`orders
`
`(over
`
`8.5 billion
`
`shares)
`
`with
`
`a
`
`total market
`
`value
`
`of approximately
`
`$227
`
`billion
`
`during
`
`the Relevant
`
`Period.2
`
`2
`the same time period, RES executed
`During
`approximately
`total market
`value of approximately
`$270 billion.
`
`45 million
`
`not held orders (over8billion
`
`shares) with a
`
`Page
`
`5 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`C. RES Made
`
`Misleading
`
`Statements
`
`to Customers
`
`about
`
`Access
`
`to Dark_Pool
`
`Liquidiity
`
`12.
`
`In marketing
`
`materials
`
`such
`
`as RES's
`
`Order
`
`Handling
`
`Guide
`
`and responses
`
`to
`
`customer
`
`questionnaires
`
`in 201 1 and 2012,
`
`RES promoted
`
`its access
`
`to dark
`
`pool
`
`liquidity.
`
`Access
`
`to liquidity
`
`is a relevant
`
`factor
`
`in a retail
`
`wholesaler's
`
`ability
`
`to provide
`
`quality
`
`executions,
`
`and the
`
`liquidity
`
`to which
`
`RES had access was
`
`a material
`
`consideration
`
`for many
`
`of RES's
`
`retail
`
`broker-
`
`dealer
`
`customers
`
`their
`
`order
`
`flow.
`
`in determining
`
`where
`
`to route
`
`a.
`
`RES's
`
`Order
`
`Handling
`
`Guide,
`
`distributed
`
`to all RES customers,
`
`represented
`
`that
`
`RES offered
`
`"elihaiicement
`
`opportunities
`
`from Credit
`
`Suisse's
`
`vast
`
`liquidity,"
`
`including
`
`access
`
`to Credit
`
`Suisse's
`
`dark
`
`pool,
`
`which
`
`was at
`
`the time was
`
`the
`
`largest
`
`U.S.
`
`equity
`
`dark
`
`pool,
`
`as well
`
`as extemal
`
`dark
`
`pools.
`
`For example,
`
`RES's
`
`2011
`
`Order
`
`Handling
`
`Guide
`
`described
`
`"enhancement
`
`opportunities
`
`from Credit
`
`Suisse's
`
`vast
`
`the largest
`
`ATS
`
`in the
`
`U.S."
`
`liquidity,
`
`including
`
`access
`
`to Crossfinder,
`
`b.
`
`In response
`
`to customer
`
`queries,
`
`RES highlighted
`
`its access
`
`to liquidity,
`
`including
`
`its access
`
`to Credit
`
`Suisse's
`
`own
`
`and other
`
`dark
`
`pools.
`
`For example,
`
`in a 201 l
`
`response
`
`to a questionnaire
`
`that
`
`a retail
`
`broker-dealer
`
`was
`
`using
`
`to help
`
`determine
`
`how to route
`
`order
`
`flow,
`
`RES focused
`
`on its ability
`
`to provide
`
`"[1]iquidity
`
`as a
`
`differentiating
`
`factor."
`
`RES
`
`further
`
`stated:
`
`"A vital
`
`compeiieiit
`
`in a principal
`
`market
`
`maker's
`
`ability
`
`to provide
`
`quality
`
`executions
`
`is the ability
`
`to efficiently
`
`source
`
`and interact
`
`with
`
`liquidity."
`
`RES then
`
`provided
`
`expanded
`
`details
`
`concerning
`
`the "three
`
`key
`
`resources
`
`. . .
`
`that
`
`enhance
`
`RES's
`
`ability
`
`to source
`
`and
`
`interact
`
`with
`
`liquidity."
`
`One
`
`of
`
`these
`
`"key
`
`resources"
`
`was
`
`access
`
`to Credit
`
`Suisse's
`
`dark
`
`pool,
`
`about
`
`which
`
`RES stated:
`
`"RES
`
`has access
`
`to Crossfinder,
`
`an anonymous
`
`iiiatchiiig
`
`engine
`
`that
`
`is solely
`
`owned
`
`by Credit
`
`Suisse
`
`Securities
`
`(USA)
`
`LLC.
`
`Crossfinder
`
`Page
`
`6 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`continues
`
`to hold
`
`its spot
`
`as the largest
`
`US equity
`
`dark
`
`pool
`
`by a considerable
`
`margin[.]"
`
`A second
`
`of
`
`these
`
`"key
`
`resources"
`
`was
`
`access
`
`to external
`
`venues,
`
`such
`
`as dark
`
`pools,
`
`through
`
`Credit
`
`Suisse's
`
`smart
`
`order
`
`router.
`
`Specifically,
`
`in
`
`describing
`
`RES's
`
`"Access
`
`to External
`
`Dark
`
`Pools,"
`
`RES stated
`
`that
`
`it had access
`
`to
`
`a "broad
`
`and expanding
`
`list"
`
`of dark
`
`pools
`
`through
`
`"Credit
`
`Suisse's
`
`proprietary
`
`solution
`
`routing."
`
`order
`
`for dark
`
`book
`
`smart
`
`13.
`
`These
`
`representations
`
`were misleading
`
`under
`
`the circumstances.
`
`Unlike
`
`not held
`
`orders,
`
`which
`
`RES regularly
`
`executed
`
`in Credit
`
`Suisse's
`
`own
`
`and other
`
`dark
`
`pools,
`
`RES
`
`rarely
`
`executed
`
`held
`
`orders
`
`in such
`
`venues
`
`between
`
`September
`
`201 1 and December
`
`2012.
`
`In particular,
`
`RES trading
`
`data
`
`indicates
`
`that
`
`during
`
`this
`
`time,
`
`RES executed
`
`only
`
`a de minimis
`
`number
`
`of
`
`customer
`
`held
`
`orders
`
`in Credit
`
`own
`
`dark
`
`pool
`
`512 orders
`
`or
`
`Suisse's
`
`(i.e.,
`
`out of 4 million,
`
`approximately
`
`0.01%)
`
`or other
`
`dark
`
`pools
`
`during
`
`this
`
`period.
`
`D. RES Did Not Disclose
`Rep_resented
`Benefits
`
`that
`
`Non-605
`
`Orders
`
`Typically
`
`Did Not Receive
`
`Certain
`
`14.
`
`In determining
`
`how to allocate
`
`order
`
`flow
`
`among
`
`various
`
`retail
`
`wholesalers,
`
`a
`
`primary
`
`factor
`
`that
`
`retail
`
`broker-dealers
`
`consider
`
`is the execution
`
`quality
`
`that
`
`each
`
`retail
`
`wholesaler
`
`delivers.
`
`Generally,
`
`the better
`
`the execution
`
`quality,
`
`the more
`
`order
`
`flow
`
`broker-dealers
`
`send
`
`to a
`
`particular
`
`retail
`
`wholesaler.
`
`15.
`
`In RES's
`
`Order
`
`Handling
`
`Guides
`
`that were
`
`distributed
`
`to all customers,
`
`RES stated
`
`that
`
`it "seeks
`
`to execute
`
`its
`
`customers'
`
`orders
`
`at
`
`the most
`
`favorable
`
`terms
`
`reasonably
`
`available
`
`under
`
`prevailing
`
`market
`
`conditions."
`
`RES also
`
`stated
`
`in its Order
`
`Handling
`
`Guides
`
`that
`
`"RES
`
`execution
`
`algorithms
`
`focus
`
`on optimizing
`
`the execution
`
`experience
`
`of
`
`retail
`
`orders."
`
`RES also
`
`highlighted
`
`in its Order
`
`Handling
`
`Guides
`
`that when
`
`RES commits
`
`capital,
`
`"[t]he
`
`benefit
`
`to our
`
`Page
`
`7 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`client
`
`is a fill without
`
`market
`
`impact.
`
`The more
`
`liquidity
`
`we offer,
`
`the
`
`less
`
`impact
`
`a client's
`
`order
`
`will
`
`have
`
`on the NBBO,
`
`potentially
`
`avoiding
`
`price
`
`dis-improvement.
`
`Our
`
`price
`
`improvement
`
`and
`
`enhancement
`
`levels
`
`are all geared
`
`to commit
`
`capital
`
`to the potential
`
`benefit
`
`of our
`
`liquidity
`
`clients."
`
`l 6.
`
`Rule
`
`605
`
`requires
`
`that market
`
`centers
`
`such
`
`as RES
`
`publicly
`
`report
`
`certain
`
`aggregate
`
`order
`
`execution
`
`information,
`
`including
`
`measures
`
`of execution
`
`quality,
`
`on an aggregate
`
`basis.
`
`Certain
`
`of
`
`orders
`
`are excluded
`
`from Rule
`
`605
`
`required
`
`reporting;
`
`for example,
`
`orders
`
`10,000
`
`shares
`
`or more,
`
`orders
`
`of
`
`less than
`
`100 shares,
`
`and not
`
`held
`
`orders
`
`are, by definition,
`
`non-605
`
`orders.
`
`Statistics
`
`published
`
`pursuant
`
`to Rule
`
`605
`
`include,
`
`among
`
`other
`
`things,
`
`the spreads
`
`paid
`
`investors
`
`by
`
`(i.e.,
`
`"effective
`
`spreads"),
`
`levels
`
`of price
`
`improvement
`
`provided,
`
`and speed
`
`of execution
`
`for
`
`various
`
`categories
`
`of orders.
`
`Although
`
`RES's
`
`broker-dealer
`
`customers
`
`received
`
`the same
`
`of
`
`their
`
`Rule
`
`605-eligible
`
`and
`
`information
`
`from RES regarding
`
`pricing
`
`and timing
`
`of executions
`
`non-605
`
`orders,
`
`and the execution
`
`prices
`
`of both Rule
`
`605-eligible
`
`and non-605
`
`orders
`
`are reported
`
`publicly,
`
`retail
`
`broker-dealers
`
`differ
`
`in the extent
`
`to which
`
`they monitor
`
`(and
`
`have
`
`the ability
`
`to
`
`monitor)
`
`execution
`
`quality
`
`for
`
`their
`
`non-605
`
`orders.
`
`17.
`
`RES received
`
`both Rule
`
`605-eligible
`
`and non-605
`
`order
`
`flow.
`
`The
`
`computer
`
`code
`
`RES used
`
`to execute
`
`orders
`
`included
`
`a function
`
`called
`
`"CountsForStats"
`
`that
`
`distingiiished
`
`between
`
`held
`
`orders
`
`The
`
`output
`
`of
`
`the
`
`that
`
`had Rule
`
`605 characteristics,
`
`and those
`
`that
`
`did
`
`not.
`
`CountsForStats
`
`function
`
`played
`
`a role
`
`in RES's
`
`decisions
`
`about
`
`how certain
`
`orders
`
`were
`
`routed,
`
`and about whether
`
`to apply
`
`price
`
`improvement
`
`to orders.
`
`I8.
`
`Between
`
`mid-2011
`
`and March
`
`2015,
`
`RES treated
`
`many
`
`non-605
`
`orders
`
`less
`
`favorably
`
`as compared
`
`to Rule
`
`605-eligible
`
`orders
`
`that were
`
`similar
`
`in other
`
`respects.
`
`Indeed,
`
`in
`
`certain
`
`instances,
`
`RES
`
`internally
`
`referred
`
`to non-605
`
`orders
`
`as
`
`"EQ-ineligible"
`
`orders
`
`(where
`
`"EQ"
`
`Page
`
`8 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`stood
`
`for
`
`execution
`
`quality).
`
`This
`
`differential
`
`treatment
`
`of certain
`
`non-605
`
`orders
`
`was
`
`not
`
`disclosed
`
`to RES customers,
`
`which
`
`was misleading
`
`under
`
`the circumstances.
`
`i. RES Generally
`
`Did Not
`
`Price
`
`Improve
`
`Non-605
`
`Orders
`
`19.
`
`In executing
`
`customer
`
`orders,
`
`RES frequently
`
`offered
`
`price
`
`improvement
`
`to
`
`improve
`
`the execution
`
`quality
`
`of certain
`
`orders.
`
`RES had discretion
`
`with
`
`respect
`
`to whether
`
`and
`
`how much
`
`price
`
`improvement
`
`to provide,
`
`but was
`
`required
`
`to do so in a manner
`
`consistent
`
`with
`
`its
`
`RES routed
`
`representations.
`
`In addition,
`
`the external
`
`venues
`
`to which
`
`orders,
`
`or portions
`
`of orders
`
`(i.e.,
`
`"child
`
`orders"),
`
`sometimes
`
`offered
`
`price
`
`improvement
`
`(although
`
`the price
`
`improvement
`
`that
`
`RES offered
`
`was
`
`generally
`
`more
`
`than
`
`the amounts
`
`that
`
`the external
`
`venues
`
`offered).
`
`20.
`
`Credit
`
`Suisse
`
`represented
`
`to its customers
`
`that
`
`opportunities
`
`for
`
`"robust"
`
`and
`
`"enhanced"
`
`price
`
`improvement
`
`was one of
`
`the
`
`"core"
`
`elements
`
`of RES's
`
`approach
`
`to executing
`
`orders.
`
`RES's
`
`Order
`
`Guides
`
`stated
`
`that RES's
`
`systems
`
`evaluate
`
`Further,
`
`Handling
`
`"automatically
`
`a number
`
`of
`
`factors,
`
`including
`
`the quoted
`
`spread
`
`at
`
`the time
`
`of order
`
`receipt,
`
`the quoted
`
`size at
`
`the
`
`time
`
`of order
`
`receipt,
`
`and the type
`
`of security
`
`(NDX,
`
`S&P
`
`100, S&P
`
`500,
`
`etc.)
`
`in determining
`
`the
`
`appropriate
`
`level
`
`of price
`
`improvement."
`
`While
`
`RES
`
`listed
`
`these
`
`non-exhaustive
`
`security-specific
`
`factors
`
`that were
`
`included
`
`in its evaluation
`
`of potential
`
`price
`
`improvement,
`
`RES did
`
`not disclose
`
`that
`
`an order's
`
`Rule
`
`605 status was also
`
`a determinative
`
`factor
`
`in assessing
`
`whether
`
`RES
`
`itself
`
`would
`
`price
`
`improve
`
`a customer
`
`order.
`
`21.
`
`Between
`
`mid-2011
`
`and March
`
`2015,
`
`RES
`
`itself
`
`generally
`
`did
`
`not
`
`improve
`
`the
`
`execution
`
`price
`
`of non-605
`
`orders.
`
`This
`
`decision-making
`
`was
`
`automated
`
`by the RES computer
`
`code.
`
`Specifically,
`
`if
`
`the execution
`
`would
`
`not be included
`
`in the publicly
`
`reported
`
`execution
`
`quality
`
`statistics
`
`(i.e., CountsForStats
`
`was
`
`"false"),
`
`RES generally
`
`would
`
`not price
`
`improve
`
`the
`
`customer
`
`order.
`
`Alternatively,
`
`if
`
`the execution
`
`would
`
`be included
`
`in the publicly
`
`reported
`
`Page
`
`9 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`execution
`
`quality
`
`statistics
`
`(i.e., CountsForStats
`
`was
`
`"true"),
`
`the order was
`
`eligible
`
`for
`
`and
`
`generally
`
`received
`
`RES price
`
`improvement.3
`
`22.
`
`Credit
`
`Suisse's
`
`representations
`
`concerning
`
`the factors
`
`that RES considered
`
`in
`
`determining
`
`price
`
`improvement
`
`levels
`
`were misleading
`
`because
`
`Credit
`
`Suisse
`
`did
`
`not disclose
`
`that
`
`non-605
`
`orders
`
`were
`
`generally
`
`ineligible
`
`for
`
`price
`
`improvement
`
`by RES.
`
`Such
`
`information
`
`would
`
`have
`
`been
`
`a material
`
`consideration
`
`retail
`
`for many
`
`broker-dealers
`
`in determining
`
`where
`
`to route
`
`non-605
`
`order
`
`flow.
`
`ii. RES Sought
`
`to Capture
`
`Impact
`
`on Select
`
`Non-605
`
`Orders
`
`23.
`
`From February
`
`2013
`
`through
`
`March
`
`2015,
`
`RES utilized
`
`two
`
`primary
`
`tactics
`
`to route
`
`customer
`
`orders
`
`that
`
`it did
`
`not
`
`fully
`
`intemalize.
`
`One
`
`tactic
`
`attempted
`
`to fill
`
`the order
`
`in Credit
`
`Suisse's
`
`and other
`
`dark
`
`pools
`
`and ELPs,
`
`where
`
`the available
`
`liquidity
`
`was
`
`unknown.
`
`The
`
`other
`
`Tactic
`
`routed
`
`customer
`
`was Routing
`
`A, which
`
`the non-internalized
`
`portions
`
`of certain
`
`orders
`
`to lit
`
`markets
`
`without
`
`first
`
`attempting
`
`to secure
`
`an execution
`
`in dark
`
`pools
`
`and ELPs.
`
`RES applied
`
`Routing
`
`Tactic
`
`A to outsized
`
`non-605
`
`orders
`
`disproportionately
`
`often
`
`compared
`
`to Rule
`
`605-
`
`eligible
`
`orders.
`
`Specifically,
`
`pursuant
`
`to the RES computer
`
`code,
`
`if a particular
`
`order
`
`had Rule
`
`605
`
`characteristics
`
`(i.e., CountsForStats
`
`was
`
`"true"),
`
`then Routing
`
`Tactic
`
`A was
`
`set
`
`to
`
`"false,"
`
`and the
`
`order would
`
`not be routed
`
`pursuant
`
`if
`
`not
`
`generally
`
`to Routing
`
`Tactic
`
`A. Conversely,
`
`the order
`
`did
`
`have
`
`those
`
`characteristics
`
`(i.e., CountsForStats
`
`was
`
`"false"),
`
`then Routing
`
`Tactic
`
`A was
`
`set
`
`to
`
`"true,"
`
`and the order would
`
`be more
`
`likely
`
`to be routed
`
`using
`
`Routing
`
`Tactic
`
`A.
`
`24.
`
`RES's
`
`differential
`
`application
`
`of Routing
`
`Tactic
`
`A was
`
`particularly
`
`important
`
`with
`
`respect
`
`to orders
`
`that,
`
`due to their
`
`relatively
`
`large
`
`size,
`
`outsized
`
`the available
`
`liquidity
`
`at
`
`the then-
`
`3 One RES customer
`for
`that customer's
`
`reached a separate agreement with RES whereby RES agreed to provide
`non-605
`held orders, which was written
`into the RES code.
`
`price improvement
`
`Page
`
`10 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`prevailing
`
`market
`
`price,
`
`or market
`
`depth,
`
`because
`
`those
`
`orders
`
`had the potential
`
`to cause market
`
`impact.
`
`Market
`
`impact
`
`refers
`
`to a phenomenon
`
`in which
`
`buying
`
`or selling
`
`a security,
`
`or attempting
`
`to buy
`
`or sell
`
`a security,
`
`may
`
`result
`
`in the market
`
`price
`
`becoming
`
`less
`
`favorable
`
`to the buyer
`
`or
`
`seller.
`
`For example,
`
`buying
`
`a security
`
`may
`
`cause
`
`its price
`
`to increase
`
`if
`
`there
`
`are fewer
`
`shares
`
`available
`
`at
`
`the current
`
`price
`
`than
`
`the customer
`
`wishes
`
`to buy.
`
`Different
`
`trading
`
`tactics
`
`may
`
`result
`
`in different
`
`degrees
`
`of market
`
`impact,
`
`influencing
`
`the overall
`
`execution
`
`quality
`
`of
`
`the order.
`
`In
`
`particular,
`
`to the extent
`
`that
`
`significant
`
`market
`
`impact
`
`occurs
`
`before
`
`an order
`
`is completely
`
`filled,
`
`it
`
`may
`
`be more
`
`costly
`
`to fill
`
`the remainder
`
`of
`
`the order,
`
`which
`
`results
`
`in a less favorable
`
`overall
`
`execution
`
`price.
`
`25.
`
`Outsized
`
`marketable
`
`held
`
`orders
`
`often
`
`can only
`
`be filled
`
`in their
`
`entirety
`
`by
`
`executing
`
`at more
`
`than
`
`one price
`
`level,
`
`including
`
`at
`
`least
`
`one price
`
`level
`
`outside
`
`of
`
`the NBBO at
`
`the time
`
`of arrival.
`
`have
`
`the potential
`
`By their
`
`nature,
`
`such
`
`orders
`
`to cause market
`
`impact.
`
`Outsized
`
`orders
`
`that RES routed
`
`pursuant
`
`to Routing
`
`Tactic
`
`A generally
`
`had the potential
`
`to cause,
`
`and in fact
`
`generally
`
`caused
`
`greater
`
`market
`
`impact
`
`over
`
`the course
`
`of
`
`the entire
`
`order
`
`(i.e.,
`
`including
`
`any
`
`intemalized
`
`portion)
`
`than
`
`orders
`
`executed
`
`with
`
`other
`
`strategies
`
`that RES used.
`
`26.
`
`RES's
`
`code
`
`attempted
`
`to calculate
`
`RES's
`
`risk
`
`and potential
`
`to profit
`
`from each
`
`order,
`
`and used
`
`that
`
`calculation
`
`to determine
`
`whether
`
`and how much
`
`of
`
`the order
`
`to internalize,
`
`and
`
`how much
`
`to route
`
`out and fill
`
`if any
`
`on a riskless
`
`principal
`
`basis.
`
`This
`
`calculation
`
`attempted
`
`to
`
`predict,
`
`among
`
`other
`
`things,
`
`RES's
`
`potential
`
`opportunity
`
`to capture
`
`market
`
`impact.
`
`Specifically,
`
`this
`
`decision
`
`was made
`
`using
`
`a utility
`
`function
`
`in the RES computer
`
`code.
`
`In making
`
`this
`
`decision,
`
`RES considered
`
`three
`
`factors:
`
`(1) potential
`
`spread
`
`capture,
`
`(2) potential
`
`impact
`
`capture,
`
`and (3)
`
`potential
`
`risk
`
`to RES.
`
`Generally,
`
`the utility
`
`function
`
`selected
`
`the level
`
`of RES's
`
`capital
`
`commitment
`
`in order
`
`to maximize
`
`the potential
`
`spread
`
`and
`
`impact
`
`capture,
`
`while
`
`minimizing
`
`Page
`
`11 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`potential
`
`risk.
`
`For
`
`large
`
`outsized
`
`orders,
`
`with
`
`the potential
`
`to cause
`
`significant
`
`market
`
`impact,
`
`impact
`
`capture
`
`was
`
`frequently
`
`the most
`
`important
`
`factor
`
`in the code's
`
`determination
`
`of how much
`
`of an order
`
`to internalize.
`
`27.
`
`When
`
`RES filled
`
`orders
`
`on a split
`
`(partially
`
`principal
`
`and partially
`
`riskless
`
`principal)
`
`basis,
`
`it
`
`typically
`
`began
`
`the execution
`
`by routing
`
`one or more
`
`child
`
`orders
`
`to the lit
`
`markets
`
`Tactic
`
`A.
`
`As
`
`those
`
`child
`
`orders
`
`were
`
`filled,
`
`the stock
`
`price
`
`onen moved
`
`using
`
`Routing
`
`higher
`
`for purchases
`
`and lower
`
`for
`
`sales.
`
`RES would
`
`then
`
`intemalize
`
`the final
`
`piece
`
`of
`
`the order
`
`(often
`
`larger
`
`than
`
`any of
`
`the individual
`
`child
`
`orders)
`
`at
`
`the new prevailing
`
`market
`
`price.
`
`Following
`
`the execution
`
`of an outsized
`
`order,
`
`there may
`
`be price
`
`reversion,
`
`in which
`
`stock
`
`prices
`
`that
`
`have
`
`been
`
`temporarily
`
`displaced
`
`as a result
`
`of market
`
`activity
`
`could
`
`potentially
`
`revert
`
`toward
`
`the
`
`original
`
`price
`
`level.
`
`If price
`
`reversion
`
`did
`
`RES was
`
`lea with
`
`profitable
`
`position
`
`occur,
`
`a potentially
`
`in the internalized
`
`portion
`
`of
`
`the order.
`
`Further,
`
`RES used Routing
`
`Tactic
`
`A significantly
`
`more
`
`often
`
`to route
`
`the riskless
`
`principal
`
`portion
`
`of split
`
`fills
`
`compared
`
`to otherwise
`
`equivalent
`
`orders
`
`filled
`
`on an entirely
`
`riskless
`
`basis.
`
`Because
`
`RES took
`
`no principal
`
`position
`
`when
`
`orders
`
`were
`
`filled
`
`completely
`
`on a riskless
`
`principal
`
`basis,
`
`and there was
`
`no market
`
`impact
`
`of orders
`
`that RES fully
`
`intemalized,
`
`split
`
`fills were
`
`those where
`
`RES had the potential
`
`to capture
`
`impact.
`
`28.
`
`in the case of a customer
`
`sell order,
`
`if
`
`the stock
`
`price
`
`decreased
`
`as
`
`For example,
`
`RES executed
`
`child
`
`orders
`
`(i.e.,
`
`sold
`
`small
`
`amounts)
`
`in a riskless
`
`principal
`
`capacity
`
`in the
`
`lit
`
`market,
`
`RES's
`
`purchase
`
`of
`
`the remaining
`
`portion
`
`of
`
`the order
`
`from the RES customer
`
`on a
`
`principal
`
`basis
`
`at
`
`the prevailing
`
`market
`
`price would
`
`be at a lower
`
`price
`
`than
`
`the price
`
`when
`
`the
`
`parent
`
`order
`
`arrived.
`
`If
`
`the price
`
`of
`
`the stock
`
`subsequently
`
`reverted
`
`back
`
`towards
`
`its original
`
`(higher)
`
`level
`
`before
`
`RES unwound
`
`its position,
`
`RES would
`
`be left with
`
`a potentially
`
`profitable
`
`Page
`
`12 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`position.
`
`RES had the opportunity
`
`to exit
`
`that
`
`position
`
`at a profit,
`
`by
`
`liquidating
`
`its position
`
`on
`
`another
`
`trading
`
`venue
`
`or by matching
`
`it against
`
`a customer
`
`order.4
`
`buy
`
`29.
`
`RES's
`
`disproportionate
`
`use of Routing
`
`Tactic
`
`A on non-605
`
`orders
`
`allowed
`
`RES
`
`the potential
`
`opportunity
`
`to profit
`
`from impact
`
`capture
`
`on a category
`
`of orders
`
`without
`
`affecting
`
`RES's
`
`published
`
`execution
`
`quality
`
`statistics.
`
`RES used Routing
`
`Tactic
`
`A on a greater
`
`percentage
`
`of non-605
`
`orders
`
`than Rule
`
`605-eligible
`
`orders,
`
`and on a greater
`
`percentage
`
`of outsized
`
`non-605
`
`orders
`
`than
`
`outsized
`
`Rule
`
`605-eligible
`
`orders.
`
`RES's
`
`use of Routing
`
`Tactic
`
`A varied
`
`over
`
`time.
`
`a.
`
`From February
`
`2013
`
`through
`
`November
`
`2013
`
`(referred
`
`to herein
`
`as "Period
`
`1"),
`
`for
`
`all RES customers,
`
`RES used Routing
`
`Tactic
`
`A almost
`
`exclusively
`
`on select
`
`categories
`
`of outsized
`
`non-605
`
`held
`
`orders,
`
`and rarely
`
`on outsized
`
`Rule
`
`605-eligible
`
`held
`
`orders.
`
`Tactic
`
`A was
`
`In particular,
`
`RES's
`
`use of Routing
`
`concentrated
`
`among
`
`non-605
`
`orders
`
`of
`
`10,000
`
`shares
`
`or more,
`
`and orders
`
`received
`
`while
`
`the markets
`
`were
`
`closed.
`
`In Period
`
`1, RES used Routing
`
`Tactic
`
`A on approximately
`
`8,600
`
`non-
`
`605
`
`outsized
`
`held
`
`orders
`
`that were
`
`filled
`
`on a split
`
`basis.
`
`These
`
`orders
`
`comprised
`
`a
`
`total
`
`of approximately
`
`120 million
`
`shares,
`
`and had a total market
`
`value
`
`of
`
`approximately
`
`$2.5
`
`billion.
`
`b.
`
`From December
`
`2013
`
`through
`
`January
`
`2015
`
`(referred
`
`to herein
`
`as "Period
`
`2"), RES
`
`continued
`
`to use Routing
`
`Tactic
`
`A more
`
`frequently
`
`for outsized
`
`non-605
`
`held
`
`orders
`
`than
`
`for outsized
`
`Rule
`
`605-eligible
`
`orders.
`
`Further,
`
`RES used Routing
`
`Tactic
`
`A across
`
`all
`
`categories
`
`of non-605
`
`orders,
`
`not
`
`limited
`
`to orders
`
`of
`
`10,000
`
`shares
`
`or more
`
`and orders
`
`received
`
`after
`
`the markets
`
`closed.
`
`During
`
`Period
`
`2,
`
`4 The RES code included
`RES established
`a position,
`
`a function
`that sent
`orders to trading
`liquidating
`if
`the position
`had not already been liquidated
`
`than 10 minutes
`venues no earlier
`it against
`customer
`by matching
`
`after
`orders.
`
`Page
`
`13 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`RES's
`
`use of Routing
`
`Tactic
`
`A varied
`
`by customer
`
`group.
`
`For one set of
`
`customers,
`
`RES used Routing
`
`Tactic
`
`A almost
`
`exclusively
`
`on outsized
`
`non-605
`
`orders,
`
`and rarely
`
`on outsized
`
`Rule
`
`605-eligible
`
`orders.
`
`In Period
`
`2,
`
`for
`
`those
`
`customers,
`
`RES used Routing
`
`Tactic
`
`A on approximately
`
`4,500
`
`held
`
`outsized
`
`non-
`
`605 orders.
`
`These
`
`orders
`
`comprised
`
`a total
`
`of approximately
`
`60 million
`
`shares,
`
`and
`
`had a total market
`
`value
`
`of approximately
`
`$990 million.
`
`30.
`
`OAG finds
`
`that
`
`the actions
`
`described
`
`above
`
`are in violation
`
`of
`
`the Martin
`
`Act,
`
`GBL
`
`§ 352
`
`et seq.,
`
`and Executive
`
`Law
`
`§ 63(12).
`
`31.
`
`OAG finds
`
`the relief
`
`and
`
`agreements
`
`contained
`
`in this Agreement
`
`appropriate
`
`and
`
`in the public
`
`interest.
`
`THEREFORE,
`
`OAG is willing
`
`to discontinue
`
`its Investigation
`
`and
`
`accept
`
`this Agreement
`
`to Executive
`
`Law
`
`in lieu
`
`of commencement
`
`pursuant
`
`§ 63(15),
`
`of a statutory
`
`action
`
`or proceeding
`
`for
`
`the enforcement
`
`of a law of
`
`this State
`
`based
`
`on the conduct
`
`described.
`
`IT IS HEREBY
`
`UNDERSTOOD
`
`AND AGREED,
`
`by and between
`
`the Parties:
`
`32.
`
`Monetary
`
`Relief
`
`RELIEF
`
`a. Monetary
`
`Relief
`
`Amount:
`
`Credit
`
`Suisse
`
`shall
`
`to the State
`
`of New York
`
`pay
`
`a
`
`penalty
`
`of $5 million
`
`(the
`
`"Monetary
`
`Relief
`
`Amount").
`
`Payment
`
`of
`
`the Monetary
`
`Relief
`
`Amount
`
`shall
`
`be made
`
`in full within
`
`fourteen
`
`business
`
`days
`
`of
`
`the
`
`effective
`
`date
`
`of
`
`this Agreement.
`
`b.
`
`Payments
`
`shall
`
`be made
`
`by wire
`
`transfer,
`
`attorney
`
`check,
`
`corporate
`
`or certified
`
`check,
`
`or bank
`
`draft,
`
`which
`
`shall
`
`be made
`
`payable
`
`to the "New
`
`York
`
`State
`
`Department
`
`of Law",
`
`and
`
`shall
`
`reference
`
`Agreement
`
`No.
`
`18-105;
`
`payments
`
`shall
`
`Page
`
`14 of 20
`
`

`

`FILED: NEW YORK COUNTY CLERK 02/25/2022 11:56 AM
`NYSCEF DOC. NO. 69
`
`INDEX NO. 652468/2020
`
`RECEIVED NYSCEF: 02/25/2022
`
`be addressed
`
`to the attention
`
`of Jonathan
`
`Zweig,
`
`State
`
`of New York,
`
`Office
`
`of
`
`the
`
`Attorney
`
`General,
`
`Investor
`
`Protection
`
`Bureau,
`
`28 Liberty
`
`Street, New York,
`
`New
`
`York
`
`10005.
`
`MISCELLANEOUS
`
`Subsequent
`
`Proceedings
`
`33.
`
`Credit
`
`Suisse
`
`expressly
`
`agrees
`
`and acknowledges
`
`that OAG may
`
`initiate
`
`a
`
`subsequent
`
`investigation,
`
`civil
`
`action,
`
`or proceeding
`
`to enforce
`
`this Agreement,
`
`for
`
`violations
`
`of
`
`the Agreement,
`
`or
`
`if
`
`the Agreement
`
`is voided
`
`pursuant
`
`to Paragraph
`
`41,
`
`and
`
`agrees
`
`and
`
`acknowledges
`
`that
`
`in such
`
`event:
`
`a.
`
`any
`
`statute
`
`of
`
`limitations
`
`or other
`
`time-related
`
`defenses
`
`are tolled
`
`from
`
`and after
`
`the effective
`
`date
`
`of
`
`this Agreement;
`
`b. OAG may
`
`use statements,
`
`documents
`
`or other materials
`
`produced
`
`or provided
`
`by
`
`to or after
`
`the effective
`
`date
`
`of
`
`Credit
`
`Suisse
`
`prior
`
`this Agreement;
`
`c.
`
`any
`
`civil