Tag: Citadel Securities (Page 1 of 13)

The SEC Now Charges Citadel For Illegal Short Selling Violations

The SEC has now charged Citadel Securities for illegal short selling violations according to a new SEC filing published on Friday.

The Securities and Exchange Commission says the market maker violated a provision of Regulation SHO, the regulatory framework designed to address abusive short selling practices, which requires broker-dealers to mark sale orders as long, short, or short exempt.

To settle the SEC’s charges, Miami-based Citadel Securities agreed to pay a $7 million penalty.

$7 million is merely a slap on the wrist to the market maker giant.

The gains Citadel collected over the years trump the SEC’s fine — retail investors allege it’s simply the ‘cost of doing business’.

According to the SEC’s order, for a five-year period, it is estimated that Citadel Securities incorrectly marked millions of orders, inaccurately denoting that certain short sales were long sales and vice versa.

The SEC’s order finds that the inaccurate marks resulted from a coding error in Citadel Securities’ automated trading system and that the firm provided the inaccurate data to regulators, including the SEC during this period.

“Compliance with the order marking requirements of Reg SHO is a key component of regulatory efforts to curtail abusive market practices, including ‘naked’ short selling,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement.

“This action against Citadel Securities demonstrates that a broker-dealer’s failure to comply with the requirements of Reg SHO can have negative downstream consequences on the accuracy of the firm’s electronic records, including its electronic blue sheet reporting, depriving the Commission of important information about the markets it regulates.”

Related: Citadel Under Investigation by Department of Justice

Retail Investors Proven Right Once Again

Market News Today - The SEC Now Charges Citadel For Illegal Short Selling Violations.
Market News Today – The SEC Now Charges Citadel For Illegal Short Selling Violations.

Since the ‘meme stock’ frenzy of 2021, retail investors have alleged Citadel Securities of ‘naked short selling’ the market.

Mainstream media personalities such as Charles Gasparino have defended Ken Griffin and his hedge fund, ridiculing investors on their claims.

Now there’s no denying the regulators’ filing.

“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game,” says Patrick McConlogue, an ex-Citadel data scientist.

Patrick McConlogue appeared on Fox Business during the ‘meme stock’ frenzy of 2021 when retail investors created one of the biggest scares in Wall Street history.

GameStop and AMC shareholders were able to create panic on Wall Street by heavily buying shares of the overleveraged shorted stocks.

As share prices soared, short sellers experienced massive losses.

GameStop was able to put Melvin Capital out of business, but Patrick McConlogue says other hedge funds were able to make back billions in losses during the halt.

The halts allowed hedge funds to enter AMC and GameStop knowing shares would plummet, allowing them to capitalize on the deflation of the price.

Patrick says the rules of the game also heavily favor hedge funds, something retail investors have urged SEC Chairman Gary Gensler for years to change.

“I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.”

Without admitting or denying the findings, Citadel Securities consented to a cease-and-desist order imposing a censure, a $7 million penalty.

The SEC’s investigation was conducted by Seth M. Nadler of the SEC’s Home Office.

Christopher Ray of the SEC’s Division of Trading and Markets; Elcin Yildirim, Alan Lenarcic, and Peter Csatorday of the SEC’s Division of Examinations; Mandy Sturmfelz of the SEC’s Market Abuse Unit; Damon Taaffe and Melissa Armstrong of the Home Office Trial Unit; and Kevin Gershfeld and Robert Nesbitt of the Enforcement Division’s Office of Investigative and Market Analytics provided assistance.

The investigation was supervised by Mr. Cave.

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Market News Today - The SEC Now Charges Citadel For Illegal Short Selling Violations.
Market News Today – The SEC Now Charges Citadel For Illegal Short Selling Violations.

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Ken Griffin Lobbied His Way Out of “Meme Stock” Scandal

Market News Daily - Ken Griffin Lobbied His Way Out of "Meme Stock" Scandal.
Market News Daily – Ken Griffin Lobbied His Way Out of “Meme Stock” Scandal.

Citadel’s Ken Griffin lobbied his way out of the “meme stock” scandal of 2021 when Citadel and Robinhood colluded just a night prior to the trading halts.

On February 18, 2021, he testified before the House Financial Services Committee about his role in the ‘meme stock’ controversy.

However, Ken Griffin donated money directly to four members of the committee, Republicans French Hill, Andy Barr, Ann Wagner, and Bill Huizenga, per Chicago Business.

The retail community is raising awareness of these actions today when lobbied congressmen still have the power to sweep market injustices under the rug.

Investors on social media say that in other places of the world this is called bribery.

“The game is not fair and it never has been. Individual investors, even when operating in a swarm, are destined to lose. How do I know? I helped design the game,” said ex-Citadel Data Scientist Patrick McConlogue.

Patrick McConlogue appeared on Fox Business during the ‘meme stock’ frenzy of 2021 when retail investors created one of the biggest scares in Wall Street history.

GameStop and AMC shareholders were able to create panic on Wall Street by heavily buying shares of the overleveraged shorted stocks.

As share prices soared, short sellers experienced massive losses.

GameStop was able to put Melvin Capital out of business, but Patrick McConlogue says other hedge funds were able to make back billions in losses during the halt.

The halts allowed hedge funds to enter AMC and GameStop knowing shares would plummet, allowing them to capitalize on the deflation of the price.

Citadel and Robinhood Colluded But There Was No Justice for Investors

Market News Today – Ken Griffin Lobbied His Way Out of “Meme Stock” Scandal.

The U.S. House Committee on Financial Services published a press release stating Robinhood and Citadel Securities engaged in ‘blunt’ negotiations before the trading of ‘meme stocks’ occurred.

The press release states that talks regarding lowering PFOF (payment for order flow) rates happened just a night before trading restrictions.

The “GameStopped” report issued by the U.S. House Committee on Financial Services greatly details how the NSCC saved Robinhood from defaulting due to failing to meet collateral obligations.

On January 28th, 2021, Robinhood routed orders to six market makers for equities: Citadel Securities, G1 Execution Services, Morgan Stanley, Two Sigma Securities, Virtu, and Wolverine.

The conversations between Robinhood and Citadel were tense as the two negotiated the price of PFOF rebate rates and price caps for AMC and GameStop.

Furthermore, Robinhood received a massive waiver of its deposit requirement from the DTCC.

And according to the report, without this waiver, Robinhood would have defaulted on its regulatory collateral obligations.

NSCC officials say the waiver was necessary to avoid systemic risk to the market.

The DTCC waived a total of $9.7 billion of collateral deposit requirements on January 28, 2021.

Robinhood is Being Sued in New Lawsuit

According to Business Insider, the court said at the time that the evidence between Citadel Securities and Robinhood was not sufficient.

But there is now a new lawsuit against Robinhood in 2023 which alleges that on January 28, 2021, Robinhood prohibited purchases of the stocks underlying the affected options on its platform and also prohibited purchases of the exercise of the affected options, and only allowed the closing out of such positions.

The lawsuit further alleges that during the period January 29, 2021 through February 4, 2021, Robinhood imposed significant limits on any purchases and continued to prevent the exercise of the affected options on its trading platform.

Consequently, the value of the affected options dropped dramatically and remained suppressed throughout the month, causing investors to suffer big losses, says the press release.

Ken Griffin’s Citadel may have been able to lobby themselves out of the situation, but Robinhood has litigation matters to attend to this year.

This raises questions about how government officials will ever be able to aid retail investors when lobbied congressmen can easily take opposing sides.

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Market News Today - Ken Griffin Lobbied His Way Out of "Meme Stock" Scandal.
Market News Today – Ken Griffin Lobbied His Way Out of “Meme Stock” Scandal.

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Wall Street Threatens to Sue SEC if New Proposals Pass

Market News Daily - Wall Street Gets Ready to Sue SEC if Proposals Pass.
Market News Daily – Wall Street Threatens to Sue SEC if New Proposals Pass.

Wall Street is threatening to sue the SEC if proposals that will change how retail orders are executed gets passed.

Gensler has been critical of payment for order flow (PFOF), whereby some retail brokers (including Schwab, ETrade and Robinhood) route orders to electronic market makers known as wholesalers (including Citadel and Virtu), who pay the brokers for access to that order flow.

These wholesalers may send the orders to exchanges and profit from spreads or even from price direction through the derivatives market, hence the major conflict of interest.

SEC Commissioners Hester Peirce and Mark Uyeda, both Republicans, also filed statements opposing the proposal. 

“This latest effort to order competition threatens to create disorder in the capital markets, the functioning of which is so important to the rest of our economy,” Peirce wrote in a statement. 

The Intercept wrote a piece on Hester Peirce in 2015 titled, “SEC Nominee To Oversee Wall Street Works At Think Tank Dedicated To Blocking Regulation.”

And according to the research, Hester Peirce received 98% of her salary from the Mercatus Center, a “think tank” that provides an academic façade to a radical anti-regulatory agenda.

In other words, Hester is a plant on the SEC meant to cater to Wall Street, not retail investors.

‘We The Investors’ Challenges Wall Street

‘We The Investors’ is taking Wall Street head on.

More than 1,300 letters have been submitted to the SEC supporting rules proposed in December that represent the biggest changes to equities trading in nearly two decades, according to Reuters.

The collective of retail investors have joined ‘We The Investors’ led by Dave Lauer in efforts to combat Wall Street as a legitimate organization that sprouted from the events of the ‘meme stock’ frenzy in 2021.

We The Investors has held two online meetings since December with SEC Chair Gary Gensler, who took questions directly from retail investors on the proposals, which include requiring most retail stock orders to be sent to auctions to boost competition.

Other proposed rules call for a new standard for brokers to demonstrate they’ve gotten the best execution for clients on transactions, as well as lower trading increments and access fees on exchanges, and stronger disclosure around retail order executions.

But Wall Street is pushing back.

The NYSE teamed up with retail broker Charles Schwab Corp and market maker Citadel Securities earlier this month to ask the U.S. Securities and Exchange Commission to withdraw two recently proposed rules aimed at revamping how stocks trade.

The move represents a coordinated industry push back against what are potentially the most impactful proposals in the SEC’s biggest attempt to reform stock market rules in nearly 20 years.

The Securities and Exchange Commission scrapped plans to vote Wednesday on a rule that would have increased regulators’ visibility into financial risks at some hedge funds and private equity funds.

After scheduling the vote last week, the five-member commission “decided to take a little more time” on the rule, an SEC spokeswoman said.

The SEC Faces Potential Lawsuits from Wall Street

Market News Today - Wall Street Gets Ready to Sue SEC if Proposals Pass.
Market News Today – Wall Street Gets Ready to Sue SEC if Proposals Pass.

Wall Street institutions are already threatening litigation if the proposals go through. 

“Ultimately, it’s going to end up, unfortunately, sadly, probably in litigation [if Gensler] decides to go down this road,” Virtu CEO Doug Cifu said in an interview at the Securities Traders Association of New York conference on March 27th at the NYSE. 

Cifu specifically cited the Administrative Procedures Act (APA), which governs the way government agencies may propose and establish regulations. 

The SEC must follow procedures outlined in the APA.  If not, it can get sued. 

Gensler is proposing a new rule, Regulation Best Execution, that would establish a national best execution standard to ensure broker-dealers send orders to the venue that will get the best price for buyers and sellers.

But FINRA is currently in control of the best execution rule, a rule Gensler believes the SEC should have, not FINRA.

FINRA is under serious scrutiny due to many scandals with the most recent having to do with the U3 halt and delisting of MMTLP stock.

Retail investors have also criticized the SEC for kneeling to Wall Street and failing to protect small investors from predatorial market practices.

Many in the retail community say SEC commissioners should be voted in, not appointed by the U.S. President.

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Market News Today - Wall Street Gets Ready to Sue SEC if Proposals Pass.
Market News Today – Wall Street Gets Ready to Sue SEC if Proposals Pass.

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SEC Scraps Vote for Hedge Fund Transparency Rule

SEC Scraps Vote for Hedge Fund Transparency Rule
Market News Daily: SEC scraps vote for hedge fund transparency rule.

(WSJ) The Securities and Exchange Commission scrapped plans to vote Wednesday on a rule that would have increased regulators’ visibility into financial risks at some hedge funds and private equity funds.

After scheduling the vote last week, the five-member commission “decided to take a little more time” on the rule, an SEC spokeswoman said.

She declined to comment on whether the cancellation owed to a lack of majority support from the commission, which is composed of three Democrats and two Republicans.

Several SEC commissioners could not immediately be reached for comment.

The rule, proposed early last year over Republican opposition, would have increased reporting requirements for filers of a confidential document called Form PF.

Among other proposed changes, it would have required large hedge funds to file reports within one business day of incidents such as extraordinary investment losses, defaults by major counterparties or spikes in margin requirements.

The rule sparked pushback from lobbyists for the hedge-fund and private-equity industries in Washington.

The Managed Funds Association, which represents hedge funds, urged the SEC last week to hold off on finalizing the rule until it was ready to adopt a separate Form PF proposal issued last August.

Who is the Managed Funds Association?

Who is the managed funds association?
Who is the managed funds association? Citadel’s Ken Griffin.

The Managed Funds Association, or MFA, is an association made up of a variety of hedge fund managers, including Citadel, Two Sigma, Point72, and Millennium Management.

That’s right, some of the industry’s biggest short sellers and the SEC just prolonged this transparency rule.

Citadel, Anchorage (defaulted), Millennium Management, and Bank of America are a few of the members who are or have been short on ‘meme stocks’ such as AMC Entertainment.

For years now, retail investors who were part of the events that occurred in 2021 have urged the SEC to enforce proper regulation from sneaky hedge funds and banks with overleveraged short positions.

The SEC has sparked excitement within the retail community when it’s announced proposals that would shed light on darker markets — however, trust has been severed as the regulator has only proved to be complicit to market injustices.

Dark pools, OTC trading, and naked shorting have suppressed retail’s favorite company stocks from rising on true demand.

Shorting has its purpose and is a useful tool to keep the markets balanced and in check.

Manipulative shorting on the other hand is what retail activists are fighting against — the un-American type that sinks businesses and disrupts innovation.

Northwest Biotherapeutics sued Citadel and other market makers for manipulating its stock price in December of 2022.

Ken Griffin’s Citadel chose to profit from the US cancer drug company through the means of short selling, a practice the hedge fund/market maker is notoriously known for.

Rather than allow the company to raise money for its treatments, hedge funds teamed up to profit from manipulated falling share prices.

But the lawsuit comes as no surprise to the retail community as Citadel has a long history of market manipulation.

Retail Investors Organize and Fight Back

Market News Daily: SEC Scraps Vote for Hedge Fund Transparency Rule.
Market News Daily: SEC Scraps Vote for Hedge Fund Transparency Rule.

‘We The Investors’ is taking Wall Street head on which means retail investors from around the world are now being represented in a way like never before for the first time in history.

More than 1,300 letters have been submitted to the SEC supporting rules proposed in December that represent the biggest changes to equities trading in nearly two decades, according to Reuters.

The collective of retail investors have joined ‘We The Investors’ led by Dave Lauer in efforts to combat Wall Street as a legitimate organization that sprouted from the events of the ‘meme stock’ frenzy in 2021.

Halts in AMC, GameStop, and other stocks during at the time angered many investors which led to the exposure of crime and market injustices on social media.

Retail investors have been pushing for market transparency ever since.

We The Investors has held two online meetings since December with SEC Chair Gary Gensler, who took questions directly from retail investors on the proposals, which include requiring most retail stock orders to be sent to auctions to boost competition.

Other proposed rules call for a new standard for brokers to demonstrate they’ve gotten the best execution for clients on transactions, as well as lower trading increments and access fees on exchanges, and stronger disclosure around retail order executions.

But Wall Street, including Ken Griffin’s Citadel is pushing back.

Related: “The Game is Rigged”, Says Ex-Citadel Data Scientist

Market News Published Daily

Market News Daily: SEC Scraps Vote for Hedge Fund Transparency Rule.

For stock market, business news and updates, join the newsletter to receive weekly market news and notifications straight to your inbox.

Franknez.com is the media site that keeps retail investors informed.

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