Tag: Citadel Securities (Page 2 of 14)

SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading

SEC Commissioner Jaime Lizarraga said on Friday that securities lending facilitates illegal trading.

The official SEC statement comes after regulators have been expected to adopt new market transparency rules that will shed light on short sellers and other market participants.

“As with securities lending, short sales, provided they are conducted in compliance with applicable rules, can play a valuable price discovery role in our capital markets.

That said, they can sometimes contribute to, or even cause, precipitous price declines, facilitate market manipulation, and generate market uncertainty and volatility”, said Commissioner Lizarraga.

“To minimize the gap between these benefits and downsides, the Commission’s action today strikes the appropriate balance between increased transparency for investors and regulators of short sale-related data, and concerns about real-time disclosure of trading strategies.

Currently, Regulation SHO is the primary rule governing short sales of equities.

Although this rule imposes some recordkeeping obligations on broker-dealers, it does not require market participants to track whether short-sellers cover their short sales or report bona fide market-making information on a regular basis.

Today’s rule will shine a light on short sale activity by institutional investment managers.

It fills gaps in the data these managers currently report about their monthly and daily short sale activities.

This data is essential for the Commission to assess and monitor risks related to large short positions, for reconstructing market events, and for deterring fraud, manipulation, and other potential market abuses.

Today, investing communities have raised concerns of market manipulation in stocks such as AMC Entertainment, Meta Materials, FingerMotion, Global Tech Industries, Mullen Automotive, and many more.

Stock manipulation from short sellers, primarily hedge funds, is a topic that main street has been urging our regulators to tackle head on.

Also Read: SEC’s Director of Enforcement Now Under Investigation for Corruption

Other Market News Today

Market News Today - SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading.
Market News Today – SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading.

For five years Citadel incorrectly marked short sales as long sales and vice versa according to the SEC’s latest report.

Retail investors have created an uproar on social media for two primary reasons.

  1. Citadel was only fined $7 million — which investors allege is merely a ‘pay to play’ fine.
  2. Citadel’s naked short selling “conspiracies” ended not being conspiracies, despite Bloomberg and WSJ journalists idolizing Citadel’s Ken Griffin.

For years now, retail investors have raised concerns over Citadel’s hedge fund and market making power, claiming there is simply too much conflicts of interest.

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.

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.

“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.”

Investors on social media say Citadel’s punishment is miniscule compared to the institutions massive gains it claims to have made, especially in the past years.

Keep in mind, Madoff never lost either.

Also Read: Judge Now Finds Broker-Dealers May Be Liable for Illegal Trading

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Market News Today - SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading.
Market News Today – SEC Commissioner Now Says Securities Lending Facilitates Illegal Trading.

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Judge Now Finds Broker-Dealers May Be Liable for Illegal Trading

A judge now finds that broker-dealers may be liable for illegal trading according to a report published by Warshaw Burstein.

Warshaw Burstein, LLP, a full-service law firm in New York City, announced on Monday that on September 29, 2023, Federal District Court Judge Lorna Schofield of the Southern District of New York issued an Opinion and Order in Harrington Global Opportunity Fund Ltd. v. CIBC World Markets, Inc. et.al  that “will reverberate through the compliance departments of every brokerage firm on Wall Street.”

In her decision, which denied the defendants’ motion to dismiss Harrington’s market manipulation claims of spoofing, Judge Schofield found that broker-dealers may be primarily liable for manipulative trading initiated by their customers because they serve as “gate-keepers” of trading on securities exchanges, and have a “continuing responsibility to ensure that their customer’s order flow … is in compliance with all applicable rules, regulations and laws and detect and prevent manipulative or fraudulent trading … under the supervision and control of the firm.”

“In their motion, the defendants unsuccessfully  argued that they are not responsible for what they characterize as “their customers’ trading” — and accordingly cannot be held liable for unlawful trading that they carry out on behalf of customers.

The Court categorically rejected the defendants’ argument and held that where a broker-dealer fails to monitor its customers’ trading and is “reckless in not knowing that the trades being executed at their customers’ direction were manipulative” the broker can be held primarily liable,” the report said.

“Warshaw Burstein and the Christian Attar law group, working together over the past 22 years, have successfully prosecuted and collected millions of dollars in damages on behalf of their clients from broker-dealers, market-makers, hedge funds, and asset-based lenders who have engaged in market manipulation schemes.”

Wes Christian Says ‘Naked Shorting’ is a Big Worldwide Problem

Market News Today - Judge Now Finds Broker-Dealers May Be Liable for Illegal Trading.
Market News Today – Judge Now Finds Broker-Dealers May Be Liable for Illegal Trading.

Famous lawyer known for fighting against market injustices Wes Christian says ‘Naked Shorting’ is a big worldwide problem.

Wes Christian was mentioned by Forbes who painted the 40-year-experienced attorney as a conspiracy theorist threatening Wall Street.

“Naked short-selling is a thing. Actually, it really isn’t. But that hasn’t stopped a group of hucksters, led by a cynical lawyer, from conjuring an excuse for meme-stock collapses — and creating a community now talking up violence against anyone in their way,” said Forbes staff member Brandon Kochkodin.

Wes says mainstream media will continue to ridicule those standing against fraud in the market but that investors should continue to raise awareness.

The Securities and Exchange Commission (SEC) announced in mid June that it charged investment adviser Sabby Management LLC and its managing partner, Hal D. Mintz in the latest naked shorting scheme.

The partners generated more than $2 million in illegal profits from what the regulator claims were in connection with a long running scheme involving misrepresentations and violations of rules for short selling and order making, as well as other violative trading.

Just last month Citadel Securities was charged for manipulating the markets, a deep concern retail investors have been alleging for years now.

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.

“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.

Will Warshaw Burstein be able to bring light to Wall Street crime and help shape the future of market regulation?

Leave your thoughts below.

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

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Market News Today - Judge Now Finds Broker-Dealers May Be Liable for Illegal Trading.
Market News Today – Judge Now Finds Broker-Dealers May Be Liable for Illegal Trading.

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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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