In re PEAK6 CAPITAL

 
 
 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 70410 / September 16, 2013 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-15493 
 
 
In the Matter of 
 
PEAK6 CAPITAL  
            MANAGEMENT 
            LLC 
 
Respondent. 
 
 
 
 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER AND CIVIL 
PENALTY 
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”), against PEAK6 Capital Management LLC (“PEAK6” or 
“Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings  
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
Findings, and Imposing a Cease-and-Desist Order and Civil Penalty (“Order”), as set forth below.   
 
 
 

 2 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
 
Summary 
 
1. These proceedings arise out of violations of Rule 105 of Regulation M of the 
Exchange Act by PEAK6, a registered broker-dealer.  Rule 105 prohibits buying an equity security 
made available through a public offering, conducted on a firm commitment basis, from an 
underwriter or broker or dealer participating in the offering after having sold short the same 
security during the restricted period as defined therein. 
 
 2. On two occasions, in June 2009, PEAK6 bought offered shares from an underwriter 
or broker or dealer participating in a follow-on public offering after having sold short the same 
security during the restricted period.  These violations collectively resulted in profits of $58,321.  
 
Respondent 
 
 3. PEAK6 Capital Management LLC is a Delaware limited liability company with its 
principal place of business in Chicago, Illinois.  PEAK6 is a registered broker-dealer engaged in 
proprietary trading activities. 
 
Legal Framework 
 
4. Rule 105 makes it unlawful for a person to purchase equity securities from an 
underwriter, broker, or dealer participating in a public offering if that person sold short the 
security that is the subject of the offering during the restricted period defined in the rule, absent 
an exception.  17 C.F.R. § 242.105; see Short Selling in Connection with a Public Offering, Rel. 
No. 34-56206, 72 Fed. Reg. 45094 (Aug. 10, 2007) (effective Oct. 9, 2007).  The Rule 105 
restricted period is the shorter of the period:  (1) beginning five business days before the pricing 
of the offered securities and ending with such pricing; or (2) beginning with the initial filing of a 
registration statement or notification on Exchange Act Form 1-A or Form 1-E and ending with 
pricing.   
 
5. “The goal of Rule 105 is to promote offering prices that are based upon open 
market prices determined by supply and demand rather than artificial forces.”  Final Rule: Short 
Sales, Exchange Act Release No. 50103.  Rule 105 is prophylactic and prohibits the conduct 
irrespective of the short seller’s intent in effecting the short sale. 
 
 
 
 
                                                 
1
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other person 
or entity in this or any other proceeding. 
 

 3 
PEAK6’s Violations of Rule 105 of Regulation M 
 
 6. On June 3, 2009, PEAK6 sold short 1,000 shares of Valero Energy Corp. (“VLO”) 
during the restricted period at an average price of $18.5175 per share.  On June 3, 2009, VLO 
announced the pricing of a follow-on offering of its common stock at $18.00 per share.  PEAK6 
received an allocation of 25,000 shares in that offering.  The difference between PEAK6’s 
proceeds from the restricted period short sales of VLO shares and the price paid for the 1,000 
shares received in the offering was $517.50.  Respondent also improperly obtained a benefit of 
$12,960 by purchasing the remaining 24,000 shares at a discount from VLO’s market price.  Thus, 
PEAK6’s participation in the VLO offering netted total profits of $13,477.50. 
 
 7.        From June 18, 2009 through June 23, 2009, PEAK6 sold short 25,100 shares of 
Petro Quest Energy Inc. (“PQ”) during the restricted period at an average price of $4.4295 per 
share.  On June 24, 2009, PQ announced the pricing of a follow-on offering of its common stock at 
$3.50 per share.  PEAK6 received an allocation of 150,000 shares in that offering.  The difference 
between PEAK6’s proceeds from the restricted period short sales of PQ shares and the price paid 
for the 25,100 shares received in the offering was $24,659.88.  Respondent also improperly 
obtained a benefit of $20,183.84 by purchasing the remaining 124,900 shares at a discount from 
PQ’s market price.  Thus, PEAK6’s participation in the PQ offering netted total profits of 
$44,843.72. 
  
  8. In total, PEAK6’s violations of Rule 105 resulted in profits of $58,321. 
 
Violations 
 
 9. As a result of the conduct described above, PEAK6 violated Rule 105 of Regulation 
M under the Exchange Act.  
 
PEAK6’s Remedial Efforts 
10. In determining to accept the Offer, the Commission considered remedial 
acts promptly undertaken by Respondent in 2009 and cooperation afforded to 
Commission staff. 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent PEAK6’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Respondent PEAK6 cease and desist 
from committing or causing any violations and any future violations of Rule 105 of Regulation M of 
the Exchange Act;   
 

 4 
 B. PEAK6 shall within fourteen (14) days of the entry of this Order, pay disgorgement 
of $58,321, prejudgment interest of $8,896.89, and a civil money penalty in the amount of $65,000 
(for a total of $132,217.89) to the United States Treasury.  If timely payment is not made, 
additional interest shall accrue pursuant to SEC Rule of Practice 600.  Payments must be made in 
one of the following ways: 
 
(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request;
2
 
(2) Respondent may make direct payment from a bank account via Pay.gov through the 
SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
(3) Respondent may pay by certified check, bank cashier’s check, or United States postal 
money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to: 
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK  73169 
 
 Payments  by  check  or  money  order  must  be  accompanied  by a  cover  letter  identifying 
PEAK6 as a Respondent in these proceedings, and the file number of these proceedings; a copy of 
the cover letter and check or money order must be sent to Gerald W. Hodgkins, Associate Director, 
Division of Enforcement, Securities  and Exchange Commission, 100 F Street, N.E., Washington, 
DC  20549.  
 
 By the Commission. 
 
 
 
       Elizabeth M. Murphy 
       Secretary 
 
                                                 
2
  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 
threshold, respondents must make payments pursuant to options (2) or (3) above. 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 70410 / September 16, 2013 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-15493 

 

 

In the Matter of 

 

PEAK6 CAPITAL  

            MANAGEMENT 

            LLC 

 

Respondent. 

 

 

 

 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER AND CIVIL 

PENALTY 

  

I. 
 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”), against PEAK6 Capital Management LLC (“PEAK6” or 

“Respondent”).  

 

II. 
 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings  

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-

and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 

Findings, and Imposing a Cease-and-Desist Order and Civil Penalty (“Order”), as set forth below.   

 

 

 



 2 

III. 
 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

Summary 

 

1. These proceedings arise out of violations of Rule 105 of Regulation M of the 

Exchange Act by PEAK6, a registered broker-dealer.  Rule 105 prohibits buying an equity security 

made available through a public offering, conducted on a firm commitment basis, from an 

underwriter or broker or dealer participating in the offering after having sold short the same 

security during the restricted period as defined therein. 

 

 2. On two occasions, in June 2009, PEAK6 bought offered shares from an underwriter 

or broker or dealer participating in a follow-on public offering after having sold short the same 

security during the restricted period.  These violations collectively resulted in profits of $58,321.  

 

Respondent 

 

 3. PEAK6 Capital Management LLC is a Delaware limited liability company with its 

principal place of business in Chicago, Illinois.  PEAK6 is a registered broker-dealer engaged in 

proprietary trading activities. 

 

Legal Framework 

 

4. Rule 105 makes it unlawful for a person to purchase equity securities from an 

underwriter, broker, or dealer participating in a public offering if that person sold short the 

security that is the subject of the offering during the restricted period defined in the rule, absent 

an exception.  17 C.F.R. § 242.105; see Short Selling in Connection with a Public Offering, Rel. 

No. 34-56206, 72 Fed. Reg. 45094 (Aug. 10, 2007) (effective Oct. 9, 2007).  The Rule 105 

restricted period is the shorter of the period:  (1) beginning five business days before the pricing 

of the offered securities and ending with such pricing; or (2) beginning with the initial filing of a 

registration statement or notification on Exchange Act Form 1-A or Form 1-E and ending with 

pricing.   

 

5. “The goal of Rule 105 is to promote offering prices that are based upon open 

market prices determined by supply and demand rather than artificial forces.”  Final Rule: Short 

Sales, Exchange Act Release No. 50103.  Rule 105 is prophylactic and prohibits the conduct 

irrespective of the short seller’s intent in effecting the short sale. 

 

 

 

 

                                                 
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other person 

or entity in this or any other proceeding. 

 



 3 

PEAK6’s Violations of Rule 105 of Regulation M 

 

 6. On June 3, 2009, PEAK6 sold short 1,000 shares of Valero Energy Corp. (“VLO”) 

during the restricted period at an average price of $18.5175 per share.  On June 3, 2009, VLO 

announced the pricing of a follow-on offering of its common stock at $18.00 per share.  PEAK6 

received an allocation of 25,000 shares in that offering.  The difference between PEAK6’s 

proceeds from the restricted period short sales of VLO shares and the price paid for the 1,000 

shares received in the offering was $517.50.  Respondent also improperly obtained a benefit of 

$12,960 by purchasing the remaining 24,000 shares at a discount from VLO’s market price.  Thus, 

PEAK6’s participation in the VLO offering netted total profits of $13,477.50. 

 

 7.        From June 18, 2009 through June 23, 2009, PEAK6 sold short 25,100 shares of 

Petro Quest Energy Inc. (“PQ”) during the restricted period at an average price of $4.4295 per 

share.  On June 24, 2009, PQ announced the pricing of a follow-on offering of its common stock at 

$3.50 per share.  PEAK6 received an allocation of 150,000 shares in that offering.  The difference 

between PEAK6’s proceeds from the restricted period short sales of PQ shares and the price paid 

for the 25,100 shares received in the offering was $24,659.88.  Respondent also improperly 

obtained a benefit of $20,183.84 by purchasing the remaining 124,900 shares at a discount from 

PQ’s market price.  Thus, PEAK6’s participation in the PQ offering netted total profits of 

$44,843.72. 

  

  8. In total, PEAK6’s violations of Rule 105 resulted in profits of $58,321. 

 

Violations 

 

 9. As a result of the conduct described above, PEAK6 violated Rule 105 of Regulation 

M under the Exchange Act.  

 

PEAK6’s Remedial Efforts 

10. In determining to accept the Offer, the Commission considered remedial 

acts promptly undertaken by Respondent in 2009 and cooperation afforded to 

Commission staff. 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent PEAK6’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 21C of the Exchange Act, Respondent PEAK6 cease and desist 

from committing or causing any violations and any future violations of Rule 105 of Regulation M of 

the Exchange Act;   

 



 4 

 B. PEAK6 shall within fourteen (14) days of the entry of this Order, pay disgorgement 

of $58,321, prejudgment interest of $8,896.89, and a civil money penalty in the amount of $65,000 

(for a total of $132,217.89) to the United States Treasury.  If timely payment is not made, 

additional interest shall accrue pursuant to SEC Rule of Practice 600.  Payments must be made in 

one of the following ways: 

 

(1) Respondent may transmit payment electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request;2 

(2) Respondent may make direct payment from a bank account via Pay.gov through the 

SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

(3) Respondent may pay by certified check, bank cashier’s check, or United States postal 

money order, made payable to the Securities and Exchange Commission and hand-

delivered or mailed to: 

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK  73169 

 

 Payments by check or money order must be accompanied by a cover letter identifying 

PEAK6 as a Respondent in these proceedings, and the file number of these proceedings; a copy of 

the cover letter and check or money order must be sent to Gerald W. Hodgkins, Associate Director, 

Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., Washington, 

DC  20549.  

 

 By the Commission. 

 

 

 

       Elizabeth M. Murphy 

       Secretary 

 

                                                 
2  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 

threshold, respondents must make payments pursuant to options (2) or (3) above.