NYSE MKT LLC LETTER OF ACCEPTANCE, WAIVER AND CONSENT NO. 20140408988 TO: NYSE MKT LLC RE:

De Paola Trading, Inc., Respondent CRD No. 143625

DATE: May 3, 2016 During the period of January 1, 2014 through March 31, 2016 (the "Relevant Period"), De Paola violated: (1) NYSE MKT Rule 935NY by improperly designating trades as Qualified Contingent Cross ("QCC") orders that did not meet the "at or near" requirement of NYSE MKT Rule 900.3NY(y).01, and therefore were not entitled to exemption from the order exposure requirements of NYSE MKT 935NY, (2) NYSE MKT Rule 935NY by improperly designating trades as QCC that did not meet the "single initiating party requirement" of RBO-Amex 14-05; and (3) Securities Exchange Act of 1934 ("SEA") Rule 611(a) of Regulation NMS by improperly identifying trades as Qualified Contingent Transactions ("QCT") that did not meet the "at or near requirement" of QCTs, and therefore were not entitled to trade through exemption. Consent to a censure, a $50,000 fine, and an undertaking. ***

Pursuant to Rule 9216 of the NYSE MKT LLC (the "Exchange") and collectively with NYSE Regulation ("NYSE") Code of Procedure, (I) De Paola Trading, Inc. ("De Paola" the "Firm") submits this Letter of Acceptance, Waiver and Consent ("AWC") for the purpose of proposing a settlement of the alleged rule violations described below. This AWC is submitted on the condition that, if accepted, NYSE will not bring any future actions against the Firm alleging violations based on the same factual findings described herein. I. ACCEPTANCE AND CONSENT A.

De Paola hereby accepts and consents, without admitting or denying the findings, and solely for the purposes of this proceeding and any other proceeding brought by or on behalf of the NYSE, or to which the NYSE is a party, prior to a hearing and without an adjudication of any issue of law or fact, to the entry of the following findings by the NYSE: BACKGROUND AND JURISDICTION 1. De Paola Trading, Inc. is a New York corporation with its principal place of business in New York, NY. De Paola Trading, Inc. became a NYSE Amex Member on May 31, 2007.

STAR No. (2014048988) (US)

PROCEDURAL HISTORY 2. This matter arises from a referral to NYSE Regulation ("NYSER") by FINRA Options Regulation ("FINRA"). FINRA conducted quarterly reviews of a sample of Qualified Contingent Cross ("QCC") orders and referrals of potentially violative Qualified Contingent Trades ("QCT") from the Chicago Stock Exchange ("CHX") between January 1, 2014 and December 31, 2015. NYSER conducted a monthly review of a sample of QCC orders for January, February, and March of 2016.' 3. Based on the aforementioned reviews, NYSER sent a list of potentially violative trades to De Paola on March 4, 2016. De Paola submitted additional information and responses regarding these potential violations on March 27, 2016. NYSER analyzed this submission and determined, due to the circumstances of certain trades, not to include several trades as violations for the purposes of settlement. 4. Following analysis, NYSER determined that during the Relevant Period, De Paola: (1) did not execute the stock and option components of 14 QCCs at or near the same time, (2) did not meet the "single initiating party" requirement for 10 QCCs; and (3) did not execute the stock and option components of 36 QCTs at or near the same time. VIOLATIONS OCC Violations 5. During the Review Period, NYSE MKT Rule 935NY provided that, with respect to orders routed to the System,2 users generally may not execute as principal orders they represent as agent unless: (i) agency orders are first exposed on the Exchange for at least one second; or (ii) the User has been bidding or offering on the Exchange for at least one second prior to receiving an agency order that is executable against such or offer. 6. However, certain exceptions apply. NYSE MKT Rule 935NY does not apply to QCC orders. See NYSE MKT Rule 985NY.03. Therefore, orders marked "QCC" are exempted from the order exposure requirements of NYSE MKT Rule 935NY. However, for an order to properly receive the NYSE MKT Rule 935NY order exposure exemption, it must meet all required elements of a QCC.

' As was announced in November 2015, NYSE Regulation has repatriated responsibility for investigating and prosecuting potential violations of the NYSE exchanges' market-specific rules. See IM-NYSE MKT 15-I, IM-NYSE Arca 15-I, 1M-NYSE 15-6 (November 4, 2015); IM-NYSE MKT 15-2, IM-NYSE Arca 15-2, IMNYSE 15-7 (November 11, 2015); IM-NYSE MKT 15-3, IM-NYSE Arca 15-3, IM-NYSE 15-8 (November 23, 2015). 2 NYSE MKT Rule 900.2NY(48) provided, in relevant part, that "Wile term 'Exchange System' ('System') shall refer to the Exchange's electronic order delivery, execution and reporting system for designated option issues through which orders and quotes of Users are consolidated for execution and:or display."

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7. During the Review Period, NYSE MKT Rule 900.3NY(y) provided that a QCC order is comprised of an originating order to buy or sell at least 1,000 contracts, or 10,000 mini-options contracts, that is identified as being part of a qualified contingent trade, coupled with a contra-side order or orders totaling an equal number of shares. A qualified contingent trade is defined in NYSE MKT Rule 900.3NY(y).01 as, among other things, a transaction consisting of two or more component orders, executed as agent or principal, where the execution of one component is contingent upon the execution of all other components at or near the same time. As a result, for an order to properly be designated "QCC," it must meet this "at or near" requirement. 8. A second required QCC element is the "single initiating party requirement." During the Review Period, RBO-Amex 14-05 (April 21, 2014) interpreted NYSE MKT Rule 900.3NY(y) to require that the originating side of the QCC be from one party and multiple orders not be aggregated to meet the 1,000 contract minimum on the originating side of the trade. Additionally, a reminder was issued to NYSE Arca and NYSE Amex Options OTP holders on March 18, 2016 that, "the originating side of a QCC transaction must be a single order from one party for at least 1000 contracts." RBO-NYSE Arca 16-07 (March 18, 2016), RBO-NYSE Arca 16-04 (March 18, 2016). 9. During the Review Period, NYSER found that the Firm designated a total of 14 orders as QCC that did not properly qualify as QCC orders because the Firm failed to execute the options and equity components of the orders at or near the same time. See NYSE MKT Rule 900.3NY(y).01. 10. As a result, these orders were automatically executed upon their entry without first being exposed on the Exchange for at least one second prior to execution in violation of NYSE MKT Rule 935NY. 11. Additionally, during the Review Period, NSYER found that the Firm designated a total of 10 orders as QCC that did not meet the single initiating party requirements of NYSE MMKT Rule 900.3NY(y) and RBO-AMEX-14-05. 12. As a result, these orders were automatically executed upon their entry without first being exposed on the Exchange for at least one second prior to execution in violation of NYSE MKT Rule 935NY.

OCT Violations 13. During the Review Period, Reg. NMS Rule 611(a) required trading centers to establish, maintain, and enforce written policies and procedures that were reasonably designed to prevent trade-throughs on that trading center of protected quotations in NMS stocks that do not fall within any applicable exception, and if relying on an exception, were reasonably designed to assure compliance with the terms of the exception.

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14.On August 31, 2006, the Securities and Exchange Commission (SEC) granted an exemption from SEC Rule 611(a) for QCTs, pursuant to SEC Rule 611(d) of Regulation NMS ("QCT Exemptive Order").3 In the QCT Exemptive Order, the SEC defined a QCT "as a transaction consisting of two or more component orders, executed as agent or principal where," among other things, "[t]he execution of one component is contingent upon the execution of all other components at or near the same time." 15.Additionally, on April 23, 2010, NYSE MKT issued Regulatory Information Bulletin 10-14, reminding ATP Holders and Firms of the required components for a transaction to qualify as a QCT, and that for the QCT Exemption to be met, "ATP Holders must ensure the timely reporting of the stock component of the stock/option transaction at or near the time of the option's [sic] transaction." RBO-Amex 10-14 (April 23, 2010). 16. During the Review Period, NYSER found that the Firm designated a total of 36 orders as QCT that did not properly qualify as QCT orders because the Firm failed to execute the options and equity components of the orders at or near the same time as required by the QCT Exemptive Order and described in RBO-Amex 10-14. 17.As a result, these orders did not qualify as QCTs and were improperly granted a trade through exemption in violation of Reg. NMS SEC Rule 6 1 1(a). RELEVANT PRIOR DISCIPLINARY HISTORY 18. De Paola previously has been issued two Cautionary Action Letters ("CALs") for similar conduct to the present matter. 19.On August 17, 2011, De Paola was issued a CAL following a FINRA investigation of QCT transactions from April 2010 to March 2011 (STAR Matter 20110275594). The CAL identified 13 QCT trades for which the option and equity components were not reported contemporaneously in violation of Rule 611(a) of Reg NMS. The CAL also reminded De Paola of its obligation under SEC Rule 17a-3 to maintain accurate records of the time that the stock components of contingent trades are transmitted to the equities broker. 20. On February 14, 2014, De Paola was issued a CAL for its failure to contemporaneously report the stock and options component of 1 QCC and 4 QCTs from January 2013 to March 2013 under NYSE Amex Rule 900.3NY(y) and Rule 611(a) of Reg NMS (STAR Matter 20130367711). Additionally, FINRA noted in this CAL that the Firm had failed in some instances to maintain accurate records of the equity transmission time for contingent orders.

3 See SEC Release No. 34-54389 (August 31, 2006) at 4-5, 71 FR 52831, and SEC Release No. 57620 (April 4, 2008) at 5-6, 73 FR 19271 ("SEC Releases").

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SANCTIONS B.

As a result of the aforementioned conduct, the Firm also consents to the imposition of the following sanctions: 1. Censure and fine in the amount of $50,000 The Firm agrees to pay the monetary sanction(s) upon notice that this AWC has been accepted and that such payment(s) are due and payable. The Firm has submitted a Method of Payment Confirmation form showing the method by which it will pay the fine imposed. The Firm specifically and voluntarily waives any right to claim that it is unable to pay, now or at any time hereafter, the monetary sanction(s) imposed in this matter. The Firm agrees that it shall not seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made pursuant to any insurance policy, with regard to any fine amounts that the Firm pays pursuant to this AWC, regardless of the use of the fine amounts. The Firm further agrees that it shall not claim, assert, or apply for a tax deduction or tax credit with regard to any federal, state, or local tax for any fine amounts that Respondent pays pursuant to this AWC, regardless of the use of the fine amounts. The sanctions imposed herein shall be effective on a date set by NYSER. 2. Undertaking to address deficiencies in written supervisory procedures The Firm also agrees to address deficiencies in its written supervisory procedures to ensure that it has implemented procedures that are reasonably designed to achieve compliance with the rules and regulations cited herein pertaining to QCC, QCT, order exposure, and order protection rules of the SEC, F1NRA, and NYSE MKT, as well as all exchanges that the Firm sends, executes, or submits QCC or QCT orders. The Firm agrees that revisions will include, among other things, sufficient instruction to employees regarding compliance with the at or near" requirement and the "single initiating party" requirement, and a means of supervisory review regarding QCC and QCT orders. The sanctions imposed herein shall be effective on a date set by NYSE Regulation staff.

II. WAIVER OF PROCEDURAL RIGHTS The Firm specifically and voluntarily waives the following rights granted under the NYSE's Code of Procedure: A.

To have a Formal Complaint issued specifying the allegations against the Firm;

B.

To be notified of the Formal Complaint and have the opportunity to answer the allegations in writing:

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C.

To defend against the allegations in a disciplinary hearing before a hearing panel, to have a written record of the hearing made and to have a written decision issued; and

D.

To appeal any such decision to the Exchange's Board of Directors and then to the U.S. Securities and Exchange Commission and a U.S. Court of Appeals.

Further, the Firm specifically and voluntarily waives any right to claim bias or prejudgment of the Chief Regulatory Officer of the NYSE, the Disciplinary Action Committee ("DAC") and its members, the Exchange's Board of Directors or Committee for Review ("CFR"), Counsel to the Exchange's Board of Directors or CFR, any Director or CFR Member, or any other NYSE employee in connection with such person's or body's participation in discussions regarding the terms and conditions of this AWC, or other consideration of this AWC, including acceptance or rejection of this AWC. The Firm further specifically and voluntarily waives any right to claim that a person violated the ex parte prohibitions of NYSE MKT Rule 9143 or the separation of functions prohibitions of Rule 9144, in connection with such person's or body's participation in discussions regarding the terms and conditions of this AWC, or other consideration of this AWC, including its acceptance or rejection. III. OTHER MATTERS The Firm understands that: A.

Submission of this AWC is voluntary and will not resolve this matter unless and until it has been reviewed and accepted by the Chief Regulatory Officer of NYSE MKT LLC, pursuant to NYSE MKT Rule 9216;

B.

If this AWC is not accepted, its submission will not be used as evidence to prove any of the allegations against the Firm; and

C.

If accepted: 1. The AWC shall be sent to each Director and each member of the Committee for Review via courier, express delivery or electronic means, and shall be deemed final and shall constitute the complaint, answer, and decision in the matter, 25 days after it is sent to each Director and each member of the Committee for Review, unless review by the Exchange Board of Directors is requested pursuant to NYSE MKT Rule 9310(a)(1)(B). 2. This AWC will become part of the Firm's permanent disciplinary record and may be considered in any future actions brought by the NYSE, or any other regulator against the Firm. 3. The NYSE shall publish a copy of the AWC on its website in accordance with NYSE MKT Rule 8313:

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4. The NYSE may make a public announcement concerning this agreement and the subject matter thereof in accordance with NYSE Rule 8313; and 5. The Firm may not take any action or make or permit to be made any public statement, including in regulatory filings or otherwise, denying, directly or indirectly, any finding in this AWC or create the impression that the AWC is without factual basis. The Firm may not take any position in any proceeding brought by or on behalf of the NYSE, or to which the NYSE is a party, that is inconsistent with any part of this AWC. Nothing in this provision affects the the Firm's (i) testimonial obligations; or (ii) right to take legal or factual positions in litigation or other legal proceedings in which the NYSE is not a party. D.

The Firm may attach a Corrective Action Statement to this AWC that is a statement of demonstrable corrective steps taken to prevent future misconduct. The Firm understands that it may not deny the charges or make any statement that is inconsistent with the AWC in this Statement. Any such corrective action would not constitute factual or legal findings by the NYSE, nor would it reflect the views of NYSE Regulation or its staff.

The undersigned, on behalf of the firm, certifies that a person duly authorized to act on its behalf has read and understands all of the provisions of this AWC and has been given a full opportunity to ask questions about it; that it has agreed to the AWC's provisions voluntarily; and that no offer, threat, inducement, or promise of any kind, other than the terms set forth herein and the prospect of avoiding the issuance of a Complaint, has been made to induce the firm to submit it.

De Paola Trading, Inc., Respondent, by:

Date

lje i

Peter De Paola President Accepted by NYSE Regulation

3-7124j4, Date

Laura J. Sea on Enforcement Counsel NYSE Regulation Signed on behalf of NYSE MKT LLC, by delegated authority from its Chief Regulatory Officer

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