Market News Today – ‘We The Investors’ Challenges Wall Street on New SEC Proposals
‘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.
Wall Street, Citadel, Face Organized Retail Investors
The New York Stock Exchange teamed up with retail broker Charles Schwab Corp and market maker Citadel Securities on Monday 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.
“We are deeply concerned that the Commission has simultaneously issued multiple far-reaching proposals that would dramatically overhaul current market structure without adequately assessing the cumulative impact on the market or the potential for unintended consequences,” the companies said in an SEC comment letter.
The SEC in December proposed requiring nearly all retail stock orders to be sent to auctions, as well as a new standard for brokers to show they get the best possible executions for their clients’ orders.
Market News Today – ‘We The Investors’ Challenges Wall Street on New SEC Proposals
The SEC also proposed lower trading increments and access fees on exchanges, and more robust retail order execution disclosures.
And now Citadel, Charles Schwab, and the New York Stock Exchange are fighting against these proposals that will help level the playing field for retail investors.
Payment for order flow has annihilated competition and reserved market maker Citadel Securities the right to buy retail orders from brokers such as Robinhood and TD Ameritrade.
During an interview with SEC Chairman Gary Gensler, the Chairman tells ‘We The Investors‘ that he believes the SEC should have the ‘Best Execution Rule‘, not the self-regulatory organization, FINRA.
We The Investors and SEC Chair Gary Gensler Discuss Equity Market Structure Reforms https://t.co/qNUkiDU4cf
Market News: SEC and IEX go after Citadel years after charges of misleading conduct.
In 2017, Citadel paid the SEC $22.6 million to settle charges that it misled customers about the way it priced trades.
The SEC found that between 2007 and 2010, Citadel used two algorithms to execute stock trades on customers’ behalf that gave investors a worse price for their trades, even when Citadel knew better prices existed elsewhere.
The SEC penalized Citadel for failing to disclose the use of those algorithms to clients.
“This affected millions of retail orders,” said Stephanie Avakian, the acting director of enforcement at the SEC at the time.
Citadel neither admitted nor denied the findings.
Today, Citadel has lost the court case against the IEX order type crippling its trading strategy, more on that down below.
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Citadel cheats retail investors
Citadel has been cheating retail investors for years now through a variety of loopholes the SEC has failed to stop.
The market maker is responsible for processing almost 50% of retail orders.
Citadel receives these orders by paying brokers such as Robinhood in what’s known as PFOF, or payment for order flow.
The problem arises when these orders are then traded through foreign exchanges allowing Citadel to pocket the best trading bid, essentially stealing from retail.
They accomplish this through HFT, or high frequency trading.
And because 90%-95% of retail orders are not executed through the lit exchange (NYSE), it gives Citadel’s short positions a massive advantage against retail investors going long.
This means only a small fraction of the demand is truly reflected in a company’s share price.
What is currently being done about the market manipulation?
The SEC has publicly discussed the possibility of banning PFOF for good, but the industry has lashed out.
In October of last year Citadel sued the SEC over the new D-Limit order that would protect displayed lit orders from being picked off by latency arbitrage players.
IEX is an exchange that relies heavily on the D-Limit order to outperform displayed order prices on other exchanges.
This means that predatory strategies such as market arbitrage, where high frequency firms profit from lower prices in foreign exchanges, will no longer be able to do so.
High frequency trading has been used against retail investors to not only gain better prices on stock from other ‘slow loading’ exchanges, but by also using this advantage to sell stock significantly cheaper.
So when you find an exchange that is showing lower prices, hedge funds betting against certain tickers may borrow high in another exchanges while benefiting the difference from selling the stock in those displaying lower prices.
The D-Limit order uses AI technology that provides more consistent and accurate data across all exchanges.
How will IEX affect Citadel?
In short, Citadel Securities and other high frequency trading firms will lose a lot of money.
The reason being is they are making money every second from using this high frequency trading technology to their benefit by getting better prices than anyone else in the market.
The IEX Exchange would put Citadel Securities in the same courtyard as retail investors, leveling the playfield.
IEX would create a foundation for a fairer market.
Citadel paid the SEC $22.6 million to settle charges on misleading conduct in 2017, but karma seems to be catching up for the hedge fund and market maker.
On July 29th, 2022, it was announced that Citadel has lost the court case against the IEX order type.
This is massive win for retail investors and a huge blow to the market maker and hedge fund.
But the SEC still has a lot of work ahead, especially if they’re looking to earn the trust of retail investors.
Only time will tell how significant this battle truly is.
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The lawsuit regarding the D-Limit order type is taking place on Monday, October 25th. Citadel is suing the SEC arguing that this new order type from the IEX Exchange will harm tens of millions of retail investors, via Reuters.
But will it?
Let’s dive deep into what the IEX Exchange is supposed to do for retail investors, how the D-Limit order will innovate the market, and what it will mean for AMC and GME.
Welcome to Franknez.com – I’ve been doing some more digging and what’s occurring with Citadel and the SEC is a lot bigger than I thought. This is an important time in history.
Let’s get started!
Impact Of IEX Exchange In Markets
So, what is the IEX Exchange anyway? IEX, or the “investors exchange” is a fair and transparent stock exchange dedicated to investor and issuer protection.
There are more than 150 broker members using it and around 10,643 unique symbols currently being traded.
The innovation behind the IEX Exchange relies heavily upon it’s D-Limit order type that is supposed to outperform displayed order prices on other exchanges.
This means that predatory strategies such as market arbitrage, where high frequency firms profit from lower prices in foreign exchanges, will no longer be able to do so.
High frequency trading has been used against retail investors to not only gain better prices on stock from other ‘slow loading’ exchanges, but by also using this advantage to sell stock significantly cheaper.
So when you find an exchange that is showing lower prices, hedge funds betting against certain tickers may borrow high in another exchanges while benefiting the difference from selling the stock in those displaying lower prices.
The D-Limit order uses AI technology that provides more consistent and accurate data across all exchanges.
This order type is going to provide high quality prices in the market and is truly innovative and for retail.
How Will The IEX Exchange Affect Citadel Securities?
In short, Citadel Securities and other high frequency trading firms will lose a lot of money.
The reason being is they are making money every second from using this high frequency trading technology to their benefit by getting better prices than anyone else in the market.
The IEX Exchange would put Citadel Securities in the same courtyard as retail investors, leveling the playfield.
IEX would create a foundation for a fair market and Citadel Securities is suing the SEC for it.
The use of high frequency trading is not protecting retail investors, on the contrary it’s betting against them and the SEC has recognized this saying, “Citadel enjoys unfair advantages over other participants”.
Fighting against this order type is like getting angry for having to share your cake at your own birthday party.
Citadel processes close to 50% of the entire market’s orders. The company would face massive losses from eliminating high frequency trading alone.
Not to mention, the heavily shorted stock they have been betting against.
What Would IEX Mean For AMC and GME?
We know that high frequency trading gives these firms a trading edge over heavily shorted stock.
They’re able to locate and identify foreign exchanges where the price is significantly lower, and use these means to cheat the system by buying back borrowed shares low; profiting the difference from selling high and driving these stocks down.
IEX would seal these cracks in the system. The D-Limit is meant to keep prices equal and consistent throughout the markets.
This order type will essentially put a halt to high frequency trading, changing the entire game in the markets.
We would have transitioned from an older world of finance, to an innovative one that may bring more participants to the market.
So, How Will This Affect AMC And GameStop?
The price moves based on supply and demand would be significantly more accurate.
I would expect massive price moves from retail momentum finally display in the lit market.
IEX is the first step towards a fair market and retail investors must support it’s innovative structure to fight high frequency trading.
Only then could we move on to the checklist of eliminating dark pool trading and other predatory strategies.
What Are The Chances Of The D-Limit Order Type Being Approved?
This would highly depend on the judge(s) looking into this matter. There are a lot of factors that can take place here and Dave Laurer, a former Citadel Securities employee said it well in a recent interview with Trey.
He mentioned you never know what kind of deals are being made behind-the-scenes that may influence certain decisions.
And although Dave Laurer wasn’t very optimistic, I believe the energy we should be feeding is that of positive impact and real change in the markets.
The D-Limit order type would be a significant innovation in our markets and must be upheld.
It would be up to retail investors to fight for justice and a fair market should it not be upheld in court.
This is a developing story so make sure to subscribe to the blog or follow me on social media to get notified on the next updates.
Is The D-Limit Order Type That Good?
To put things into perspective, the IEX Exchange has done numerous tests observing the accuracy of the D-Limit order type.
Citadel’s customers are in for a massive shakeup entering 2022.
The hedge fund just updated their liquidity terms for all investors and the institution continues to lose money on bets they’re not willing to close.
They are limiting quarterly withdrawals to 6.25%, meaning it would take 16 quarters, or four years to fully pull out unless the client is willing to pay a fee.
Unless Citadel Securities closes their heavily shorted positions in both AMC and GME, clients are in for more losses leading into 2022.
Should clients pull out?
It’s definitely worth considering.
Welcome to Franknez.com – hedge fund Citadel Securities has just made a desperate attempt to keep their clients’ money. Desperate times call for desperate measures.
Let’s get started!
Community, this is massive.
Aside from setting tighter restrictions on withdrawals, Citadel Securities is also giving their clients an ultimatum.
Citadel Gives Desperate Ultimatum to Customers
Citadel’s funds are currently closed to new investors, so if someone quits, they might not be allowed back in the future.
The hedge fund has given this desperate ultimatum to its customers in efforts to hedge against losing bets.
Clients have a better chance at yielding returns by opening a brokerage account and investing in an index fund every month.
More of the general public is learning how to invest in stocks.
They’re not looking for hedge funds to play with their money.
They are taking accountability and researching where their money can grow both short-term and long-term.
Analyst Says ‘Buy GME and AMC’ Before Evergrande Crash
A veteran credit analyst is encouraging buying GME and AMC shares to hedge against a market crash.
In this article I discuss why the possibility of AMC and GME experiencing a MOASS is very likely due to an Evergrande crash.
Now, Dr. Marco Metzler, an advisory board member of the German Market Screen Agency says crypto and ‘meme stocks’ can yield a massive opportunity for investors.
Retail investors in the AMC and GME community have been right all year.
Overleveraged positions, dark pool trading, naked shorting, negative beta, all of it.
AMC and GME stock are going to experience massive short squeezes and hedge funds betting against these two stocks are about to cause severe losses for their clients.
Regulators take Morgan Stanley and hedge funds to court – Subpoenas
Regulators are taking banks such as Morgan Stanley and multiple hedge funds to court.
Financial institutions have been receiving subpoenas ordering them to court after several investigations, more on that below.
Retail investors have been demanding the SEC and Justice Department take action for decades now.
Will this new wave of retail investors be the ones to spark change in the markets?
Welcome to Franknez.com – today’s market news is surrounding the crackdown of banks and hedge funds. Be sure to stick around and join the discussion in the comment section of the blog below.
Let’s dive right into it!
Regulators are taking financial institutions to court.
I will be updating this article as new information arises so be sure to join the newsletter to get notified.
Some of the biggest banks and hedge funds are getting dragged to court.
And while not all of the information is known yet, here’s what we do know.
Morgan Stanley & Goldman Sachs get subpoenas
Morgan Stanley and Goldman Sachs get subpoenaed
Regulators are investigating communications between banks and hedge funds.
Morgan Stanley, based in New York is among the many firms reported to have received subpoenas.
Now these banks are receiving subpoenas; a court order to come to court.
Subpoenas may be used in both criminal and civil cases but often result in jail time or heavy fines if ignored.
Why are hedge funds and banks going to court?
Regulators are examining whether bankers might have improperly tipped hedge fund clients in advance of large share sales.
The report also says regulators are investigating whether banks also alerted favored clients ahead of public disclosures of trades, and if such information benefited the fund.
The Department of Justice is also investigating the matter.
We’ve seen this type of strategy play out in the past with GameStop and AMC early last year.
Insiders communicated about halting retail trades as they sold off their entire AMC and GameStop positions.
Meanwhile, retail investors were left helpless unable to buy the assets.
Further price surges from ‘meme stocks’ would have resulted in catastrophic losses for hedge funds and banks alike.
What can be done in order to avoid the collapse of an entire system?
The SEC has taken a stance against high frequency trading and is currently supporting the D-Limit order from IEX.
It’s time for retail investors to speak up and let our government leaders know our needs in the market.
Welcome to Franknez.com – the blog that fights for retail investors and for a fair market. Today’s topic is extremely important so let’s dive right into it.
Let’s get started!
System of Checks and Balances
In the United States, the system of checks and balances provides each branch of government with individual powers to check the other branches and prevent one branch from becoming too powerful.
However, there seems to be a massive concentration of power between market makers Citadel and Virtu in the finance world.
These two market makers are responsible for processing majority of retail investor orders.
This creates massive systemic risks since there is so much power concentrated just within these two key players.
Should one or both fail, the entire system could collapse.
This almost happened in January during the ‘meme stock’ rallies.
Citadel claims they were the only market maker processing orders from Robinhood and this is a big problem.
There needs to be a separation of power.
It’s extremely important that retail investors voice their needs from government leaders regarding this matter.
PFOF Takes More Than It Gives
Citadel, Virtu, and Robinhood continue to stand by payment for order flow.
The issue with PFOF is that it takes more than it actually gives.
Market makers argue that it saves retail investors billions of dollars annually but fail to mention that they also make money from retail through high frequency trading.
In this documentary you will find Citadel makes their money shorting stock.
The Story of Citadel
Retail investors don’t want their orders processed by a company that is a market maker, hedge fund, and dark pool all at the same time.
Not only is Citadel profiting from retail money through high frequency trading, but they are also shorting the stock retail investors are buying through various means.
Dark pool trading and naked short selling are some other ways we’ve seen hedge funds suppress the rise of a stocks share price.
More so in ‘meme stocks’ such as GameStop and AMC, which are heavily shorted.
But there’s another issue that has yet to be addressed and that is OTC, or what’s also known as off-exchange trading.
The Rise of Off-Exchange Trading
Over-the-counter (OTC), or off-exchange trading is when trading occurs between two parties instead of through an exchange, such as the NYSE (New York Stock Exchange).
Market makers essentially negotiate with one another through dealer quotation services such as FINRA’s OTC Bulletin Board.
Yes, that is the same FINRA that is supposed to be protecting retail investors and safeguarding market integrity.
Off exchange trading is not as regulated as the NYSE nor does it require prices to be publicly disclosed.
Market makers can short a stock in these off exchange trading platforms and also create a ‘perfect hedge’, allowing them to offset or eliminate all risk on their position(s).
Retail investors go long on stocks.
So when market makers such as Citadel and Virtu are using tools to make money from shorting stocks, retail investors are at a massive disadvantage.
Market Makers Are a Threat to Our Economy
Market makers pose a serious risk to our economy and the businesses that provide massive value to our society.
As long as this concentration of power isn’t broken, the United States economy will always face systemic risk.
And when the entire country is economically on its knees, financial institutions who shorted on the way down will be the only ones compensated for it.
This is when integrity is buried by greed.
So what’s going to be done about it?
Our community now has a voice.
We must continue to fight against market corruption, and we must fight for a fair market.
Only then will we be able to mitigate systemic risk and make a positive impact in our economy.
Retail Investors Can Grow Our Economy
With more people now learning about the markets more than ever, this could greatly benefit our economy.
Not only does the average person get to invest in the stock market, but we get to support the ideas and innovations of the companies in our country.
People don’t need to make a lot of money to invest.
But fair investing could improve the quality of life for millions of people.
The average person could provide more for their family, the government would collect capital gain taxes, and our businesses would excel much more rapidly.
Our government must look at solutions for economic prosperity and growth.
Market makers such as Citadel and Virtu suppress economic growth for their selfish gain.
They do not contribute to society.
This is why we’re seeing a power like China catch up to the United States with such an intense and exponential growth.
They’ve eliminated a lot of the issues in their markets that we have in ours today.
Institutional investors play a dominant role in the U.S markets, while Chinese markets are dominated by retail investors.
Judges Rao, Walker, and Sentelle, asked tough questions during the first part of this Citadel vs SEC lawsuit hearing.
The hearing took place yesterday, October 25th, 2021 but continues today.
I’m going to be breaking down parts of the hearing and summarizing key points.
I will also be linking the video of the live lawsuit hearing for your viewing pleasure.
Welcome to Franknez.com – the Citadel vs SEC lawsuit hearing has commenced. Be sure to bookmark this page is this developing story unfolds.
Let’s get stared!
The lawsuit hearing started with Judge Walker asking Mr. Wall, Citadel’s lawyer, “Mr. Wall, do you think latency arbitrage exists?”
To which Mr. Wall responded, “[stutters] I don’t think the court has to get into it..”
And this set the entire mood of what was about to go down.
To start off, all three judges were great.
Both Mr. Wall and Catherine Stetson of IEX, were asked very fair questions.
Let’s begin with Citadel’s argument against SEC and IEX technology.
Citadel Argument Against The SEC
In the legality of things, Citadel Securities is suing the SEC for ‘violating’ the Administrative Procedure Act that sets requirements for making changes to agency regulations.
As you know, the changes the SEC made was approving the D-Limit order through the IEX Exchange.
This D-Limit order eliminates market arbitrage and predatory tactics against retail investors by using AI technology to level the share prices of stock throughout all exchanges and offering higher and better quality prices.
Citadel Securities says the SEC disregarded important data showing that the rule would hurt retail investors.
On a side note, Citadel Securities is not for retail investors.
Retail investors do not want their orders going through Citadel nor any association having to do with the market maker.
Citadel Securities is not just a market maker, but a hedge fund and dark pool altogether.
Their predatory tactics against retail investors have suppressed the momentum rallied by the AMC and GME community looking to spark a short squeeze from these heavily and overleveraged stocks.
What Is The Data That Would Hurt Retail Investors?
According to Mr. Wall, the data the SEC missed that would hurt retail investors is that share prices would be higher due to IEX.
He argues that IEX is not sufficiently tailored for retail investors but fails to identify exactly how they miss the mark.
Mr. Wall is suggesting that a leveled playfield would harm retail investors because IEX is able to set better and higher prices than their current model…
It seems Citadel wants to protect retail investors from paying higher and more accurate share prices across all exchanges?
Ladies and gentlemen, this argument is pitiful.
Retail investors have been fighting for a fair market and for a leveled playfield where high frequency trading isn’t affecting their trades and long-term investments.
In simpler terms, IEX would not hurt retail investors but rather lay a foundation towards a more effective and fair market.
It’s this very reason the hashtag #CitadelIsNotForRetail has been trending on Twitter.
I think it’s fair to say that if we took a vote from retail investors, majority would vote for an IEX solution.
IEX Just Wants Liquidity (Bigger Market Share)
Mr. Wall argued that the premise doesn’t even surround latency arbitrage or market arbitrage but rather IEX’s desire for more liquidity, or bigger market share.
When avoiding questions about predatory tactics often used by high frequency trading firms, Mr. Wall deflects confirming the current use of market arbitrage by claiming IEX simply wants to gain liquidity.
In the lawsuit hearing, Mr. Wall confirms Citadel processed up to 56% or retail orders within a month time-frame.
It seems Citadel Securities is more concerned about losing market share than protecting retail.
But that’s not difficult to see.
Citadel Securities has proven to abuse their power and we’ve seen this specifically in AMC and GME stock.
As one of the top short sellers of the two stocks, we’ve seen millions of failure-to-delivers get reported, and the overextension of dark pool trading and even naked shorting occur.
High frequency trading has further given Citadel Securities a massive advantage over retail investors going long on these stocks.
Citadel Securities Argues No Latency Arbitrage Has Taken Place
Mr. Wall mentions that maybe a decade ago latency arbitrage could have been possible but not in today’s world.
This is where we see Catherine Stetson of IEX step in to give her stance in this lawsuit hearing.
“Citadel Pays Hundreds of Millions To Brokers”
Catherine Stetson made a great entrance providing backing information that IEX data has indeed found latency arbitrage.
IEX Exchange is the firm that has introduced innovation to the market with its D-Limit order.
The D-Limit order uses AI technology to execute high quality predictions across the market to set higher and more accurate share prices.
This order type eliminates market arbitrage strategically used by high frequency trading firms such as Citadel Securities and gives retail investors a fair playing field.
When orders are process by Citadel Securities, they are able to move them through several different exchanges, allowing them to profit from slower loading share prices on foreign exchanges.
Orders being process through IEX’s model enables the share prices to load equally amongst all exchanges.
Citadel Securities argues that this model intervenes with the natural laws of the stock market.
The same ones that have allowed them to take advantage of market participants.
Catherine Stetson made a valid point when she said, “Citadel pays hundreds of millions of dollars to get retail orders, and profit from them.”
During the lawsuit hearing, Judge Walker sternly addressed Mr. Wall by saying, “You’re the one who’s trying to regulate your way into market victory.”
It’s not difficult to see the intentions of both parties.
“We Are In The Middle of A Speed-War We Never Signed Up For” – Catherine Stetson
Catherine Stetson made a remarkable statement that addressed the real issue of high frequency trading in the markets.
Her statement regarding retail investors participating in a speed-war we never signed up for sums up the deceit of market maker, hedge fund, and dark pool, Citadel Securities.
This is a statement declaring change in our markets.
This is a statement fighting for a fair market, and a voice aimed towards protecting retail investors.
IEX is seeking to eliminate market arbitrage from high frequency trading firms and begin processing orders that will put retail and financial institutions in the same playfield.
But in short, the market’s share price would reflect more on the actual supply and demand, releasing pressure for growth.
The SEC Is Fighting To Protect Retail
The SEC has been under fire by retail investors primarily due to the lack of regulation within our markets.
However, I think it’s fair to say the SEC is doing a great service by supporting IEX and the D-Limit order that will level the playfield for all participants.
Although the SEC’s discussion in the lawsuit hearing was brief, Emily Parise stood her ground as to why the SEC was not violating the Administrative Procedure Act.
This case continues today and I will be updating you on the second part to the lawsuit hearing here tomorrow.
You can watch the hour debate on YouTube here (starts at 55:00).
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