Case: 1:14-cr-00551 Document #: 48-3 Filed: 10/05/15 Page 1 of 4 PageID #:906
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`Exhibit C
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`Exhibit C
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`Case: 1:14-cr-00551 Document #: 48-3 Filed: 10/05/15 Page 2 of 4 PageID #:907
`1 of 3
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`(cid:41)(cid:40)(cid:39)(cid:40)(cid:53)(cid:36)(cid:47)(cid:3)(cid:37)(cid:56)(cid:53)(cid:40)(cid:36)(cid:56)(cid:3)(cid:50)(cid:41)(cid:3)(cid:44)(cid:49)(cid:57)(cid:40)(cid:54)(cid:55)(cid:44)(cid:42)(cid:36)(cid:55)(cid:44)(cid:50)(cid:49)
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`(cid:39)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:81)(cid:87)(cid:85)(cid:92)(cid:3)(cid:3) 07/24/2015
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` ANAND TWELLS, a white male, was interviewed at his place of employment,
`the offices of CITADEL LLC, 131 S. Dearborn Street, Chicago, Illinois.
`Also present during the interviews were attorneys Shannon Murphy and Daniel
`Rubenstein, Winston & Strawn LLP, legal counsel for CITADEL, as well as
`Michael Weiner, Deputy General Counsel of CITADEL. Upon being advised of
`the identity of the investigating agent and the nature of the interview,
`TWELLS provided the following information.
` TWELLS graduated in 2004 from Washington University in St. Louis,
`Missouri with a background in finance and economics. He was subsequently
`employed by FREDDIE MAC from 2004 to 2006 and went to work as a
`Quantitative Trader at CITADEL, where he is currently employed in that
`capacity. As a Quantitative Trader, TWELLS focuses on the use of
`algorithmic trading systems to trade nearly any asset class trading on an
`exchange, including futures contracts traded on the CME Group. TWELLS does
`not program or design the algorithmic trading strategies, but he is
`responsible for supervising them while they are operating. TWELLS is
`responsible for ensuring that the algorithmic trading systems are operating
`within their parameters and according to their strategies. TWELLS also
`handles risk management in the operation of these systems, and he provides
`feedback to the Quantitative Research Team responsible for designing the
`algorithmic trading systems. TWELLS had the same responsibilities during
`the 2011 time frame.
` TWELLS is also responsible for notifying CITADEL's compliance department
`of any market abuses that he might observe while overseeing the algorithmic
`trading systems. TWELLS sees perhaps a "handful" of market abuses by other
`participants over the course of a typical year, and he always reports these
`to CITADEL compliance. Among the trading abuses that TWELLS has seen is
`the "flashing" of orders into electronic markets. "Flashing" refers to
`orders being cancelled very shortly after they were entered into a market
`and TWELLS acknowledged that this is a type of manipulative trading.
`
`(cid:44)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81) 07/17/2015 (cid:3)(cid:68)(cid:87) Chicago, Illinois, United States (In Person)
`(cid:41)(cid:76)(cid:79)(cid:72)(cid:3)(cid:6) 318C-CG-2951807
`(cid:69)(cid:92) POTTER BRENT E
`(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:71)(cid:82)(cid:70)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:81)(cid:72)(cid:76)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:80)(cid:80)(cid:72)(cid:81)(cid:71)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:81)(cid:82)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:79)(cid:88)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:37)(cid:44)(cid:17)(cid:3)(cid:44)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:37)(cid:44)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:86)(cid:3)(cid:79)(cid:82)(cid:68)(cid:81)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:92)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:74)(cid:72)(cid:81)(cid:70)(cid:92)(cid:30)(cid:3)(cid:76)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)
`(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:88)(cid:87)(cid:86)(cid:76)(cid:71)(cid:72)(cid:3)(cid:92)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:74)(cid:72)(cid:81)(cid:70)(cid:92)(cid:17)
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`07/20/2015
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`(cid:39)(cid:68)(cid:87)(cid:72)(cid:3)(cid:71)(cid:85)(cid:68)(cid:73)(cid:87)(cid:72)(cid:71)
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`RPTS_002-000004
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`Case: 1:14-cr-00551 Document #: 48-3 Filed: 10/05/15 Page 3 of 4 PageID #:908
`(cid:41)(cid:39)(cid:16)(cid:22)(cid:19)(cid:21)(cid:68)(cid:3)(cid:11)(cid:53)(cid:72)(cid:89)(cid:17)(cid:3)(cid:19)(cid:24)(cid:16)(cid:19)(cid:27)(cid:16)(cid:20)(cid:19)(cid:12)
` 318C-CG-2951807
`(cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:39)(cid:16)(cid:22)(cid:19)(cid:21)(cid:3)(cid:82)(cid:73) Interview of ANAND TWELLS
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`07/17/2015 (cid:15)(cid:3)(cid:51)(cid:68)(cid:74)(cid:72)
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`(cid:15)(cid:3)(cid:50)(cid:81)
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`TWELLS has generally seen this in less liquid equities markets, which are
`usually easier to influence through manipulative trading. This behavior is
`aimed at generating the appearance of buying or selling interest in a
`market that does not actually exist. This type of trading activity is not
`permitted under CITADEL's policies. CITADEL's algorithmic trading
`strategies do not engage in "flashing" or "spoofing" and only enter bona
`fide orders that CITIDEL intends to execute.
` It is generally quite difficult for TWELLS to determine whether another
`trader is engaging in manipulative trading simply because TWELLS does not
`have the ability to see who is placing the potentially abusive orders.
`Generally, only the exchange knows the identity of the market participant
`entering specific orders. If TWELLS had the ability to see that orders
`were repetitively placed and quickly cancelled by a single market
`participant, it would be possible to conclude that this person intended to
`influence the market. If the orders happened to be placed by a number of
`different traders, it would be less likely that there was any manipulative
`intent on their part.
` TWELLS has observed instances in the past in which large orders were
`"flashed" into less liquid equities markets, and TWELLS suspected that a
`market participant was attempting to influence the market. This was only a
`logical conclusion on his part based upon his observation of the trading
`pattern. TWELLS was unable to conclusively demonstrate that these
`instances were manipulative trading attempts, because he did not know the
`identity of the market participants entering those orders. Even though he
`was unable to prove manipulative trading, TWELLS still reported his
`observations to CITADEL compliance on those occasions.
` TWELLS was provided with the opportunity to examine the trading data on
`sheet B and stated that he understood the data, as well as the fact that
`the trading took place on or about 9/2/2011. TWELLS acknowledged that
`sheet B showed large orders that were entered into the CME GROUP gold
`futures market and cancelled shortly thereafter. TWELLS characterized the
`deliberate and rapid cancellation of large orders shortly after they were
`placed to be potentially manipulative activity. If those orders were not
`bona fide - that is if they were not intended to be executed, this trading
`activity would definitely be manipulative. If the pattern shown on sheet B
`repeated itself throughout the trading day, and was attributed to a single
`market participant, it would be "safe to say that it was manipulative."
`Had TWELLS noticed this type of activity at the time, he would have
`reported it to CITADEL's compliance department and attempted to make a
`quick strategy adjustment in the CITADEL algorithmic trading strategies
`trading in that market. This was important to prevent CITADEL algorithms
`from continuing to lose money to this type of trading. TWELLS might have
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`RPTS_002-000005
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`Case: 1:14-cr-00551 Document #: 48-3 Filed: 10/05/15 Page 4 of 4 PageID #:909
`(cid:41)(cid:39)(cid:16)(cid:22)(cid:19)(cid:21)(cid:68)(cid:3)(cid:11)(cid:53)(cid:72)(cid:89)(cid:17)(cid:3)(cid:19)(cid:24)(cid:16)(cid:19)(cid:27)(cid:16)(cid:20)(cid:19)(cid:12)
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` 318C-CG-2951807
`(cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:39)(cid:16)(cid:22)(cid:19)(cid:21)(cid:3)(cid:82)(cid:73) Interview of ANAND TWELLS
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`(cid:15)(cid:3)(cid:50)(cid:81)
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`07/17/2015 (cid:15)(cid:3)(cid:51)(cid:68)(cid:74)(cid:72)
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`shut the algorithms off and temporarily ceased trading altogether in the
`affected markets. In response to a report from one of its traders, CITADEL
`compliance would likely have followed up with the CME GROUP in an attempt
`to halt the manipulative conduct. CITADEL has a vested interest in
`equities and futures markets that are free from manipulative or disruptive
`trading. TWELLS could not specifically recall seeing this type of trading
`in the futures markets on or about 9/2/2011.
` There have been several instances in TWELLS' experience in which he had
`to make quick adjustments in the operating parameters of CITADEL
`algorithmic trading strategies in order to keep them from making losing
`trades in the face of apparent manipulative trading by other market
`participants. There have also been occasions in which TWELLS has shut the
`algorithms off completely and temporarily ceased trading in certain markets
`due to apparent manipulative trading by others.
` Although CITADEL algorithmic trading strategies take into account many
`different economic factors in formulating trading decisions, it is possible
`for the algorithms to be "spoofed" or tricked into making losing trades.
`Among the factors examined by the algorithms are large orders entered at or
`near the best bids and offers in a particular market. If these orders were
`not bona fide, this might be a factor in spoofing the CITADEL algorithms.
`It is possible that the CITADEL algorithms were spoofed in the trading
`shown on sheet B, although TWELLS could not be certain due to the many
`factors examined by these algorithms. It is possible that the CITADEL
`algorithms concluded that gold futures contract prices would drop in this
`case, in part due to the appearance of large offers at or near the best
`offer. In that case, it is possible that the CITADEL algorithms would
`decide to sell gold contracts at the present.
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`RPTS_002-000006
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