Market News: Biotech Company sues Citadel for market manipulation.
Biotech company Northwest Biotherapeutics is suing Citadel and other market makers for allegedly manipulating its stock price.
The company is accusing Citadel Securities LLC, Susquehanna, Virtu, and other Wall Street firms of driving its stock price down through the use of various illicit trading activities.
The lawsuit was filed on Thursday in Manhattan federal court.Â
Northwest Biotherapeutics alleged the market makers had repeatedly engaged in âspoofing,â where traders place orders with an intent to fool other investors about a stockâs demand and manipulate the price.
Northwest, whose shares trade over the counter, also sued Canaccord Genuity Inc., G1 Execution Services LLC, GTS Securities LLC, Instinet LLC, Lime Trading Corp. and Virtu Americas LLC.
Virtu Financial Inc is suing the SEC, alleging on Tuesday its primary regulator had not responded to a public records request.
Virtu, a market maker with a large equities business, said it submitted a Freedom of Information Act (FOIA) request in June to determine if the SEC had met legal requirements to evaluate potential investor harm and market risks while considering new rules for the handling and execution of retail stock orders.
The SEC declined to comment.
The FOIA request sought, among other things, communications between SEC Chair Gary Gensler and various stakeholders involved in retail stock trading.
“What we’re doing is exercising our rights as citizens … to understand what this Chair is looking at and who he’s meeting with,” Virtu Chief Executive Doug Cifu told Reuters.
“We think it’s important that there be clarity and transparency — that’s what the SEC requires of us as a listed company, so we’re just taking that same standard and saying, be transparent in how you’re dealing with potentially seismic changes to equity market structure,” he added.
Cifu has said Virtu may sue the SEC over other potential rule changes Gensler outlined in June.
What Does the Market Maker Fear?
Virtu SEC Lawsuit Update.
The industry has attacked the SEC as several plans to level the playing field for retail investors have been proposed, one being the ban of PFOF (payment for order flow).
Now it seems market makers such as Virtu want to know ahead of time what the SEC is up to in order to act now.
Virtu suing the SEC speaks volumes since majority of retail investors have doubted the SEC has true power to create any change in the market.
I’m curious to know what you think.
Leave your thoughts in the comment section down below.
Market News: Ken Griffin speaks out on FTX and retail investors.
Billionaire investor Ken Griffin, the founder and CEO of multinational hedge fund Citadel, warned that the collapse of cryptocurrency exchange FTX could weaken confidence in financial markets at large and hurt the ability of younger investors to save for retirement.
Ken Griffin told Fox Business, “FTX is one of these absolute travesties in the history of financial markets.”
The firm’s bankruptcy may affect up to 1 million creditors and comes amid reports that at least $1 billion in client funds disappeared.
The Wall Street Journal is now reporting that ex-CEO Sam Bankman-Fried cashed out $300 million during a $420 million raise from several investors last year for personal use.
Sam Bankman-Fried is now facing a class-action lawsuit that was filed on November 11th, 2022.
Celebrities named in the lawsuit include Steph Curry, Shaquille OâNeal, Shohei Ohtani, Naomi Osaka, Larry David, and Kevin OâLeary who allegedly helped Bankman-Fried promote the exchange.
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Citadel’s Ken Griffin Says Retail Investors May Likely Ditch the Markets
Griffin expressed concern that losses sustained by younger investors who lost money due to FTX may make them less likely to invest their savings in capital markets, including traditional instruments like stocks and bonds.
“The confidence, though, of a generation in financial markets has also been shaken. That’s really awful because the 20-some-year-olds to 40-year-olds who are so engaged in crypto â they’ve got to save for their retirement, and if they don’t believe or trust in financial markets, this is a huge problem. They need to own stocks, they need to own corporate debt, they need to partake in our global capital markets,” Griffin said.
Citadel is currently partnering with Virtu, Schwab, Paradigm, Sequoia, and other Wall Street giants to form EDXM Crypto Exchange.
A cryptocurrency exchange that is supposed to provide transparency and lower transaction costs through the use of high liquidity and tight spreads.
But concerns are growing within the retail investor community as Citadel enters the crypto space, calling it an outrage due to the hedge funds’ long history of abuse of power.
“The bottom line is American investors have really gotten hurt here to the tune of hundreds of billions of dollars in decline in market cap in crypto over the last two years. I mean that really strikes at the entire core essence of what investor protection is all about,” Griffin said.
Market News and Updates: Retail community weary over Citadel and crypto involvement.
Concerns in the retail community are growing over Ken Griffin’s Citadel’s involvement in the crypto space.
Citadel is partnering up with Charles Schwab, Fidelity, Sequoia, Paradigm, and Virtu to launch EDXM, a cryptocurrency exchange.
Users on Twitter are weary about the potential crime a powerhouse such as these Wall Street giants may cause, especially after the collapse of FTX.
#CITADELSCANDAL has been trending on social media platforms such as Twitter and Truth after numerous counts of conflicts of interest have been shared by the retail community.
If there’s one thing that the ‘meme stock’ frenzy has shown us, it’s that it wasn’t a phase.
The ‘meme stock’ frenzy represents the empowerment of retail investors against Wall Street injustices.
Retail investors are leaving a strong imprint in finance; one could argue that finance is now becoming somewhat of a culture.
This ‘culture’ is shared in both the stock and cryptocurrency markets where retail investors want a leveled playfield.
Social media is now making it easier to expose Wall Street fraud and manipulative tactics used to take advantage of investors.
Crypto News: Citadel and Partners to launch EDXM Crypto Exchange.
Citadel is partnering up with Charles Schwab, Fidelity, Sequoia, Paradigm, and Virtu to launch EDXM, a cryptocurrency exchange.
The fall of FTX was primarily due to centralized players so what’s to say EDXM won’t be subject to such errors?
EDXMâs custody and wallet technology is being provided by crypto custody and infrastructure company Paxos, the companies announced in October.
Paxos, which is a custodian regulated by New York state, holds customer accounts in fully segregated accounts and has signed up large consumer-facing clients to enable crypto trading.
Its customers include PayPal, broker dealers such as Interactive Brokers, and others such as Nubank and Mastercard.
Crypto is still a taboo area for most of Wall Street, but with companies such as Citadel and its partners, it could attract big institutional money.
EDXM is a new crypto exchange being developed by Wall Street giants such as Citadel, Virtu, and Fidelity for digital assets such as cryptocurrencies.
EDXM plans to offer delivery settlement versus payment settlement, a settlement method thatâs used in traditional securities trading.
Other promises include extremely low transaction fees due to tight spreads enabled by greater liquidity.
The crypto exchange is also supposed to be different from some other crypto providers that are the market maker, exchange, and custodian all in one, which can be a conflict of interest and is typically not done in traditional markets.
Sort of like how Citadel is a market maker, hedge fund, and dark pool.
The head of strategy at Paxos says EDXM will provide transparency for the crypto market.
Some investors might argue that Citadel and its partners should provide more transparency in the stock market first before making such claims for the cryptocurrency market.
While some on Wall Street might think EDXM could lift the crypto industry, others look at the partnership as a means for Wall Street to take advantage of investors elsewhere.
Market News: Citadel and friends are entering the crypto space | Ken Griffin.
Citadel and friends are entering the crypto world very soon.
EDX Markets plans to bring ‘traditional finance’ to the crypto space, a not so ‘traditional’ space to begin with.
The exchange made up of Citadel, Sequoia, Paradigm, Virtu, Charles Schwab, and Fidelity is debuting in November.
EDX Markets will start trading a limited number of spot, crypto tokens starting with a November trial period, with the official launch in January, per Bloomberg.
Similar to trading equities and options, EDX will allow investors to buy and sell digital assets through their existing broker dealer, rather than an outside venue or directly through a crypto-native exchange.Â
âWeâre taking some of the best features of traditional finance and bringing it to the digital markets to make it more efficient, and bring that cost saving to investors,â Nazarali said.
Nazarali is the former global head of business development at Citadel Securities.
But as many are aware, these financial institutions have a long history of playing unfair.
Will these sharks taint the crypto space too?
Let’s look at Citadel’s market manipulation history.
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Citadel Market Manipulation
2015
In 2015, an account operated in China by the brokerage arm of US hedge fund Citadel was suspended.
It was the latest casualty of regulatorsâ hunt for market manipulators and short sellers at the time.
The China Securities Regulatory Commission said that the Shanghai and Shenzhen stock exchanges had suspended 24 accounts as part of a probe into high-frequency trading.
The investigation focused on a practice known as “spoofing” in which an investor submits a buy or sell order but then withdraws it before a sale is completed â a practice that can mislead investors by creating the false impression that a stock is trading at a particular price.
Citadel confirmed that one of its accounts managed by Guosen Futures was among those suspended.
2017
In 2017 Citadel paid the SEC $22.6 million to settle charges of misleading conduct.
The hedge fund 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 customersâ behalf that gave investors a worse price for their trades, even when Citadel knew better prices existed elsewhere.
âThis affected millions of retail orders,â said Stephanie Avakian, the acting director of enforcement at the SEC at the time.
Citadel neither admitted nor denied the findings.
2021
In 2021, Failure-to-Delivers (FTDs) rose dramatically in the period leading up to January 28th, 2021, a phenomenon consistent with increasing short interest by market makers such as Citadel Securities.
FTDs are indictive of naked short selling, which occurs when a short seller does not actually possess the security it is supposed to borrow.
This practice is largely inaccessible to individual investors but accessible to market makers.
At the time, Citadel, Robinhood, and others restricted retail investors from buying ‘meme stocks’ in order to prevent escalating institutional losses.
Citadel eventually lost billions after betting against AMC Entertainment in 2021.
The Chicago Tribune published a piece explaining exactly what retail investors have been warning the SEC about.
Citadel Securitiesâ dark pool dominates a big part of the financial world, accounting for as much as half of U.S. stock market activity.
The Chicago Tribune says this prominent dark pool is run by Chicago Billionaire Ken Griffinâs Citadel Securities and has been targeting small scale retail investors.
And theyâre not wrong.
Dark pools are typically involved in payment for order flow (PFOF), where they pay broker firms to receive retail order flow.
Brokers such as Robinhood and TD Ameritrade accept payment for order flow.
But retail investors have been bringing these nefarious practices in the market to light.
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Shoutout to @EduardBrichuk for compiling some of this information on Twitter.
Institutional Investor says Citadel owned approximately 2,305,711 shares of AMC but neither Fintel nor MarketBeat show this to be true.
Other hedge funds that were previously short on AMC and purchased shares were Millennium and Wolverine as shown below.
It looks like aggressive short sellers are now going long.
This is big news for AMC Entertainment.
Has the company finally convinced Wall Street of its worth?
Why are hedge funds going long on AMC now?
Citadel buys AMC stock? Why are hedge funds going long on AMC?
The answer is quite simple, hedge funds are simply hedging their losing bets.
They are going long as momentum spurs and going short during cool-off periods.
It makes sense, but does it mean Ken Griffin is on retail investors side?
I think that’s a little too much.
Ken Griffin’s Citadel takes advantage of retail investors by trading their orders in foreign exchanges, profiting from better trading deals outside the lit market.
The hedge fund also has the power to suppress stocks from moving up based on retail demand by overleveraging their short positions and flooding the market with selling pressure.
This is why retail investors disdain Ken Griffin and Citadel.
Market makers and hedge funds have prevented AMC from fully squeezing which means they’ve tampered with retail’s money.
And retail will never be okay with that.
Institutional Investor says Ken Griffin is on retail’s side because Citadel is going long on AMC.
Are they trying to clear their name with this hit?
Market News: Robinhood faces scrutiny today for last year’s trading restrictions
U.S. District Court Judge Cecilia Altonaga in Miami dismissed some allegations against the Robinhood last year but is allowing others in a proposed investor class-action lawsuit to move forward.Â
Robinhood must face market manipulation claims this year that arose from the ‘meme stock’ frenzy in early 2021.
The broker had allegedly colluded with market maker Citadel and removed the buy button, preventing retail investors from buying stocks such as AMC and GameStop.
US District Judge Cecilia Altonaga said in her ruling Thursday that the case raises âinteresting legal questions”.
Here’s the latest market news.
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Robinhood faces scrutiny more than a year later
U.S. District Court Judge Cecilia Altonaga in Miami said in the ruling that investors in GameStop Corp, AMC Entertainment Holdings Inc and seven other stocks can proceed with a proposed class action lawsuit alleging the restrictions artificially increased the stocks’ supply.
The lawsuit was one of several cases brought against Robinhood after it temporarily restricted its customers from buying AMC and GameStop as they began to surge in share price.
Citadel, who to this date is short on the ‘meme stocks’, allegedly colluded with Robinhood the night prior to the trading restrictions.
The U.S. House Committee on Financial Services published a press release in July stating Robinhood and Citadel Securities engaged in âbluntâ negotiations before the trading of âmeme stocksâ occurred.
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.
All of which are short on AMC and GameStop.
But despite the continued claims to this date, it leaves you wondering.
Is Robinhood a scapegoat?
Could Robinhood simply be taking the blame for everything that occurred last year, allowing market makers to get away with market manipulation?
See, there’s a connection between Judge Cecilia Altonaga and a defendant’s law firm.
Altonagaâs husband George Mencio, is a partner to Holland and Knight, the defendant of Two Sigma Securities in this case.
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 customersâ 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.
âThis affected millions of retail orders,â 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 âslow loadingâ 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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BREAKING: Citadel Securities just lost the court case to the IEX order type.
The ruling is a notable victory for IEX and a blow to Citadel Securities, which profits from small differences between the bid and ask prices in a trade.
(Bloomberg)âCitadel Securities LLC lost its case against the US Securities and Exchange Commission over a market order type from IEX Group Inc., after arguing the SEC botched its approval.
A trio of federal judges in Washington on Friday upheld the regulatorâs decision on the order type, D-Limit, which features a 350-microsecond delay meant to reduce the advantage of high-frequency traders.
The electronic trading firm founded by billionaire Ken Griffin argued that D-Limit hurts investors by delaying their orders and that the SEC approval process broke the laws and rules that govern it.
This is big news.
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A massive win for retail investors
This is a huge win for retail investors and of course a big victory for IEX.
Citadel Securities, which profits from small differences between the bid and ask prices in a trade, will be losing a lot of money.
IEX, which markets itself as a champion of fairness in pricing for the average investor, began offering the discretionary limit order in October 2020 after the SEC stood by it in August.
In suing its own regulator, Citadel Securitiesâone of the top market makers on the exchangeâhad asked the court to send D-Limit back to the SEC for reconsideration and reversal.
Investors had no update on this case until now, Citadel loses the court case to IEX.
âThe SECâs determination that the DLimit order does not violate the Exchange Act by unfairly discriminating or unduly burdening competition was reasonable and supported by substantial evidence,â the court found.
Citadel Securities spokesperson David Millar said in a statement: âWe look forward to continuing to engage with the SEC to ensure that the best interests of both retail and institutional investors are protected.â
IEX had no immediate comment on the courtâs decision.
The SEC didnât immediately respond to a request for comment.Â
What Is The D-Limit Order?
The D-Limit order is designed to protect liquidity providers from potential âadverse selectionâ by latency arbitrage trading strategies.
This rule basically gives traders a way to buy or sell stock at the exchange while protecting them against unfavorable price moves, via Reuters.
âThe D-Limit Order is an artificial intelligence order type that protects displayed lit orders from being picked off by latency arbitrage players.â
âIt aims to benefit displayed equity market quotes with better prices, larger displayed sizes and more competition among liquidity providers.â via, JLN.
This order is a massive threat to Citadel as it takes away predatory trading through the practices of market arbitrage.
What is Market Arbitrage?
Market arbitrage is the act of buying a security in one market and simultaneously selling it in another market for a higher price.
Traders frequently attempt to exploit the arbitrage opportunity by buying a stock on a foreign exchange where the share price hasnât yet been adjusted for the fluctuating exchange rate, via Investopedia.
This type of trading takes advantage of everyone involved, including retail investors.
Citadel personnel argued that the D-Limit rule is detrimental to millions of retail investors and undermine the reliability of the markets.
