CBOE GLOBAL MARKETS INC

In June 2013, the SEC charged the Chicago Board Options Exchange and an affiliate C2 Options Exchange for systemic breakdowns in their regulatory and compliance functions as a self-regulatory organization. CBOE agreed to pay a $6 million penalty — the first financial penalty ever assessed against an exchange for violations related to regulatory oversight (SEC Press Release 2013-107).

The SEC found that CBOE demonstrated an overall inability to enforce Regulation SHO, the federal short-selling rule, with an ineffective surveillance program that failed to detect wrongdoing despite numerous red flags that its members were engaged in abusive short selling. CBOE investigators responsible for Reg SHO surveillance never received any formal training and never read the rules they were supposed to enforce. The failures extended beyond short-selling: the SEC also found breakdowns in CBOE's regulatory audit trail, trade surveillance, and its obligation to prevent future violations. CBOE subsequently reorganized its Regulatory Services Division, hired a chief compliance officer and two deputy chief regulatory officers, updated written policies and procedures, increased its regulatory budget and staff, and retained a third-party consultant to review its enforcement program.