Tag: Citadel (Page 1 of 8)

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

Ex-Citadel employee Patrick McConlogue says the market is rigged.
Market News Daily: Ex-Citadel employee Patrick McConlogue says the market is rigged.

Patrick McConlogue, an ex-Citadel Data Scientist said during the ‘meme stock’ frenzy that the stock market is rigged, claiming he helped design it.

“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.”

Not many investors know this, but Patrick actually breaks down how Citadel and other hedge funds were able to make billions back in only weeks from halts.

In this article, I’m going to share his words and knowledge in the industry directly with you.

Share this article to raise awareness of the market injustices ‘experts’ have claimed were never true.

Your voice matters.

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Ex-Citadel Employee Reveals Rigged Trading Game

Ex-Citadel employee Patrick McConlogue says the market is rigged.

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.”

Below is ex-Citadel Data Scientist Patrick McConlogue’s story.

AMC Stock: The SEC Has Now Violated Threshold Rule

Patrick McConlogue Says the Stock Market is Rigged

Ex-Citadel employee Patrick McConlogue says the market is rigged.
Ex-Citadel employee Patrick McConlogue says the market is rigged.

“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.

A few years ago, I worked at the massive hedge fund Citadel. The multi-billion dollar fund was caught up in this week’s scandal for bailing out hedge fund Melvin Capital after everyday traders on Robinhood appeared close to liquidating the fund through mass buying of the GameStop stock $GME.

My role at Citadel was as an engineer in Long Term Quantitative Strategies. The entire department, filled with programmers and compliance officers, is dedicated to something called ‘alpha’ which determines the buying strategy of the fund.

I was responsible for innovative proprietary technology that capitalizes on public data faster than any other hedge fund. It’s a classic situation of machines against humans. I respect many of my colleagues, the problem isn’t the people, it’s the rules of the game which heavily favor the funds.

A group of traders on the r/WallStreetBets Reddit thread, now consisting of over 8.6M members, noticed that someone had overly “shorted” the GameStop $GME stock.

They decided it was the perfect time to buy. It was only around $18 per share and easily affordable for the common investor who kept buying, driving up the price of the stock.

As the buying frenzy continued the hedge funds who had taken the opposite position started to hemorrhage money.. BIG money.

The small investors celebrated their success online as news broke that the hedge fund Melvin Capital Management had lost so much on the $GME short position that they had to be bailed out by bigger hedge funds.

While the markets were closed Melvin Capital’s sinking battleship received an emergency infusion of $2.75 billion from Citadel and Point72.”

‘Meme Stock’ Halts

Ex-Citadel employee Patrick McConlogue says the market is rigged.

“On Thursday morning, Robinhood — the commission-free stock trading app used by small investors — suddenly shut down buys on $GME and a few other stocks that were under siege.

Only sell orders went through, reversing the trend, driving the stock prices back down and shoring up the hedge funds’ sinking ships. Remember, when the stock price goes down, the people who hold the “shorts” make money.

This started a chain reaction. Other retail trading platforms like E*Trade and TD AmeriTrade began freezing the stock for individual investors. But hedge funds own supercomputers.

They have direct access to stock markets. While small investors were frozen the hedge funds traded massive positions and quickly earned back the billions in losses from the past few days.

The rules of the game had been exposed, in broad daylight no less.

Robinhood users, when signing up for the popular trading app that offered “free trading” were likely unaware of their role in the hedge funds’ ability to reap huge profits.

The system is broken.”

Patrick McConlogue left Citadel for decentralized finance and co-founded a new technology called Overline that takes the philosophy of DeFi to the extreme.

Not only is Overline unable to freeze any of your assets but it can’t even turn off the exchange; it’s not possible.

You can read Patrick’s full write-up here.

Related: Ken Griffin Thanks Redditors for ‘Meme Stocks’

Market News Published Daily

Market News Today - Ex-Citadel data scientist says the market is rigged.
Market News Today – Ex-Citadel Data Scientist says the market is rigged.

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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.

Market News Published Daily

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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Analyst: AMC and GME Have Highest Squeeze Potential

Market News Daily - Analyst say AMC and GME Have Highest Squeeze Potential.
Market News Daily – Analyst says AMC and GME Have Highest Squeeze Potential.

S3 analyst says AMC Entertainment (NYSE:AMC) and GameStop (NYSE:GME) stock have the highest squeeze potential in the market.

“As the broader stock market has been on a tear for about a month, things are looking grim for investors with big short positions in stocks like AMC Entertainment Holdings Inc. and GameStop.”

AMC’s and GME’s short interest data is what ignited the massive rallies in 2021.

Today, both AMC and GME have a high short interest of 26.69% (AMC) and 20.73% (GME).

AMC’s short interest was only 25% when it surged to its all-time high of $72 per share in June of 2021.

Short interest dropped to 14% as short sellers closed positions only to pick right back up throughout 2022 and 2023.

Both AMC and GameStop shares have been suppressed from rising through heavy dark pool trading and suspiciously through naked short selling, evident in high FTDs (fails-to-deliver).

Two years later and GameStop is finally a profitable company.

AMC Entertainment, the largest movie theatre chain in the world, continues to innovate and creatively raise cash with a mission to erase its debt accumulated during the pandemic.

Hedge Funds Face Big Risks

Ihor Dusaniwsky, head of predictive analytics at financial technology and analytics firm S3 Partners, compiled a list of those most vulnerable stocks, headed by such names as AMC (AMC), GameStop Inc. (GME), Coinbase Global Inc. (COIN) and CarMax Inc. (KMX).

“One factor that is also killing profits for short sellers is the borrowing costs on stocks that no one is willing to part with, and the stock that figures highest on that list is AMC.”

AMC’s cost to borrow recently skyrocketed to more than 1,000% with its cost to borrow average currently being reported at 928%.

“Short sellers want to short the stock, but they are not able to get a stock borrow locate and therefore cannot execute their short on the street,” Dusaniwsky told MarketWatch in an interview.

“But, when any stock borrows become available — lenders, brokers know they can charge inflated fees as there is huge demand for the name.”

“In this case there is an AMC–[preferred stock] APE arbitrage trade that will be profitable if the conversion occurs soon because the high financing costs are eating into those expected profits every day, including weekends,” Dusaniwsky said.

But the S3 analyst isn’t the only one stating there is big squeeze potential in AMC and GameStop.

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

Strategist Says Mother of All Short Squeezes is Here

Market News Today - Analyst: AMC and GME Have Highest Squeeze Potential.
Market News Today – Analyst: AMC and GME Have Highest Squeeze Potential.

Interactive Brokers Chief Strategist Steve Sosnick says there’s big demand to short AMC Entertainment stock.

He says the biggest reason aside from the company’s fundamentals is its new merge with its equity (NYSE:APE).

“It’s very hard to keep the momentum in these things because economic reality does take hold.

Bed Bath & Beyond, at one point was the best performing stock on the board until reality set in and they began defaulting, averted bankruptcy, but using a deal that is so dilutive that it’s unavoidable.”

Sosnick says AMC is in a very special situation because of the proposal to merge APE with AMC common shares.

“Right now we’re seeing such a demand to short AMC partly because of its difficulties but partly because of the special situation.

This really is what they were looking for in some ways as the mother of all short squeezes.

The borrow rate, it costs you 700% to borrow the shares overnight — if you can find them,” said the Interactive Brokers Chief Strategist on Yahoo Finance.

Market News Published Daily

Market News Today - Is Amazon buying AMC Entertainment?
Market News Today – Analyst: AMC and GME Have Highest Squeeze Potential.

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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.

Market News Published Daily

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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AMC Stock Plunges After Being Removed from the Threshold List

AMC Removed Threshold List
Market News Daily – AMC removed from threshold list.

AMC Entertainment (NYSE:AMC) stock plunges after being removed from the NYSE Threshold Securities List; this should not be happening.

The SEC (Securities and Exchange Commission) violated the 13-Day Threshold List Rule after AMC remained listed for more than 25 consecutive days.

AMC CEO Adam Aron said on Twitter he asked the NYSE and FINRA to look into the stock due to the alarming amount of FTDs in market.

But the CEO never publicly demonstrated a letter confirming the bold claims.

Videos have surfaced of the CEO scrutinizing any talks about market manipulation during an in-theatre event.

Yahoo Finance published a segment on AMC being on the threshold list highlighting the cause being due to naked short selling.

“Market Makers, like those at the New York Stock Exchange, Citadel is one, they can engage in naked short selling and it’s perfectly legal, it’s part of their market making duties to provide liquidity for a stock.”

The problem is naked short selling isn’t ‘legal’ and it takes advantage of a company’s stock price by driving shares down even when demand from retail buyers is high.

Naked short selling isn’t supposed to be illegal from a regulatory perspective and legal whenever Wall Street decides it to be.

Shares of AMC Entertainment fell -15% on Tuesday.

AMC stock went from being up more than +110% this year to now being up only +18%.

[stock_market_widget type=”chart” template=”basic” color=”#5679FF” assets=”AMC” range=”1mo” interval=”1d” axes=”true” cursor=”true” range_selector=”true” display_currency_symbol=”true” api=”yf”]

What Should Have Happened Instead?

The 13-Day Threshold Rule states that a broker-dealer with fail-to-deliver positions for 13 consecutive settlement days must immediately close out the ‘FTD’ position by purchasing shares in the open market.

AMC’s share price should have surged in a buy-back or ‘repurchase’ of shares in the lit exchange.

AMC FTDs spiked up to more than $36 million in FTDs last month, through the report is still in the process of updating via T+35.

Market News Today – AMC removed from threshold list.

FTDs, or Failure-to-deliver occurs when one party in a trading contract (whether it’s shares, futures, or options) fails to deliver on their obligations.

These failures derive due to buyers not having enough money to take delivery and pay for the transaction at settlement.

In the case of sellers, it means not having the goods to meet that transaction.

This is a direct result of naked short selling in a company stock, according to Yahoo Finance.

So far, there’s been zero positive impact on the price from AMC being removed from the threshold list.

The only thing shareholders can do now is wait for the approved proposals to go into effect after AMC’s lawsuit has concluded.

Leave your thoughts on what’s happening with AMC today

The company has been through a lot, and so have shareholders.

Shareholders are either more level-headed than they ever were before, or more fearful — and it’s quite easy to see on social media.

How is AMC Entertainment standing in your eyes?

Is this just another bump on the road like we’ve seen in the past with AMC stock?

Or does it seem a little more serious?

Leave your thoughts below and share this article to get your voice heard.

Market News Published Daily

Market News Today - AMC removed from threshold list.
Market News Today – AMC removed from threshold list.

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Regulators Strengthen Punishment for Naked Short Selling

Market News Today - Regulators Strengthen Punishment for Naked Short Selling.
Market News Today – Regulators Strengthen Punishment for Naked Short Selling.

(BK) The Securities and Futures Commission of the Financial Services Commission imposed a pecuniary penalty of 6.05 billion won (US$4.58 million) on two securities companies that committed naked short selling.

The Financial Investment Services and Capital Markets Act of South Korea was revised in April 2021 so that illegal short sellers will face pecuniary penalties instead of fines.

The two companies have become the first such case.

Today, naked short selling is illegal in South Korea, unlike covered short selling.

Investors in the United States have raised naked short selling concerns on social media, urging the Securities and Exchange Commission to model the practice of nations such as South Korea.

Previously, illegal short selling in the South Korean stock market was detected infrequently and violators could go almost unpunished.

This is because the maximum fine according to the act before the revision was 100 million won (US$75,694).

According to the amended act, the maximum pecuniary penalty is equal to the amount of illegal short selling.

In addition, violation may lead to at least one year in prison or a fine equivalent to 300 to 500 percent of the illegal profit or avoided loss.

This model is raising attention in the United States as the predatorial practice has dominated the industry for decades.

Naked Short Selling in America

Market News Today - Regulators Strengthen Punishment for Naked Short Selling.
Market News Today – Regulators Strengthen Punishment for Naked Short Selling.

Today, naked short selling in the American markets is given a blind eye.

Retail investors believe U.S. regulators to be complicit in the market injustices that occur on a daily basis.

(Singapore) Genius Group (NYSEAMERICAN:GNS) CEO Roger Hamilton has led CEOs to take legal action against naked short selling in the market.

He recently shared a petition on social media to end naked short selling in efforts to raise awareness of the illegal short selling strategy.

Naked shorting is the illegal practice of short selling shares that have not been affirmatively determined to exist, per Investopedia.

The predatorial practice allows short sellers to short a stock without there actually being any stock available to short.

In 2015, The SEC approved the use of naked short selling on IPOs although it was deemed an illegal practice in 2010.

Roger Hamilton says he noticed something was wrong in his company stock after shares would plummet despite his company having strong fundamentals and funding.

This is when he began to speak publicly about what was happening to his company.

Another public figure who has spoken out against naked short selling is Jon Stewart.

Regulators have always had the power to stop the manipulation happening in our stock market but have created rules that cater primarily to hedge funds.

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

Patrick McConlogue, an ex-Citadel Data Scientist said during the ‘meme stock’ frenzy that the stock market is rigged, claiming he helped design it.

“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.”

The dilemma here is that institutions are able to get away with the ‘capitalism’ card every time an issue is brought to their attention.

SEC Chairman Gensler has said that the SEC cannot completely interfere with the industry due to a company’s capitalistic rights in America.

Which makes sense through a capitalistic view, however, there should be tougher laws in certain sectors and industries, especially those that have the power to create massive economic downturns.

Regulators in other countries have strengthened the punishment for naked short selling for a reason — the manipulation creates systemic risk.

The question is, how many times will the U.S have to see the collapse of markets and our economy to understand this?

Other countries have recognized these fallacies in their market, maybe it’s time the U.S does the same.

Related: ‘We The Investors’ Challenges Wall Street on New SEC Proposals

Market News Published Daily

Market News Today - Regulators Strengthen Punishment for Naked Short Selling.
Market News Today – Regulators Strengthen Punishment for Naked Short Selling.

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Citadel Has a Long History of Market Manipulation

Citadel Market Manipulation
Market News: Citadel and friends are entering the crypto space | Ken Griffin.

Ken Griffin and friends are entering the crypto world very soon — investors are concerned as Citadel has a history of several violations and fines.

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. 

“We’re 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,” 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 as well as other Citadel violations and fines in the past.

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Citadel Market Manipulation

Citadel Fines and market manipulation.
Citadel violation and fines – 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 regulators’ 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 — 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

SEC Citadel

In 2017 Citadel was fined by 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 customers’ behalf that gave investors a worse price for their trades, even when Citadel knew better prices existed elsewhere.

“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.

2021

Citadel violations and fines.
Citadel violations and fines – market manipulation.

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.

But the entire system needs a refresh – The DTCC waived a total of $9.7 billion of collateral deposit requirements on January 28, 2021, saving brokers, and screwing up retail investors.

2022

The Chicago Tribune published a piece explaining exactly what retail investors have been warning the SEC about.

Citadel Securities’ 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 Griffin’s Citadel Securities and has been targeting small scale retail investors.

And they’re 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.

Related: Biotech Company Suing Citadel Over Market Manipulation

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Citadel Said in 2004 Payment for Order Flow Creates Conflict

Market News Today: Citadel said payment for order flow creates conflicts of interest.
Market News Today: Citadel said payment for order flow creates conflicts of interest.

Citadel pushed back on the possibility of a payment for order flow (PFOF) ban in June of 2022.

But Citadel said in 2004 that payment for order flow “creates conflicts of interest and should be banned”, according to an SEC file.

Gary Gensler said there may be a conflict of interest for brokers and that too much power is concentrated in a handful of market makers.

The SEC Chairman plans to reroute retail investors into an automated system that would provide a deep pool of liquidity.

“Citadel Group urges the Commission to ban payment for order flow. This
practice distorts order routing decisions, is anti-competitive, and creates an obvious and substantial conflict of interest between broker-dealers and their customers.

Citadel against payment for order flow 2004.
Citadel against payment for order flow 2004.

Broker dealers accepting payment for order flow have a strong incentive to route orders based on the amount of order flow payments, which benefit these broker-dealers, rather than on the basis of execution quality, which benefits their customers.”

These statements come directly from Citadel in the filing.

After the GameStop and AMC incidents in 2021, retail investors urged the SEC to ban payment for order flow after discovering Robinhood reroutes retail orders to short-seller Citadel.

“Redditors, thank you so much for helping create the best pipeline we’ve ever had”, said Ken Griffin on Business Insider.

Citadel and Industry Push Back

A spokesperson for Citadel Securities released the following statement to CNBC:

“It is important to recognize that the current market structure has resulted in tighter spreads, greater transparency, and meaningfully reduced costs for retail investors. We look forward to reviewing the proposals and working with the SEC and the industry towards our longstanding objective of further improving competition and transparency.”

“You need to be very deliberate on that approach,” Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association (SIFMA) said.

“We have been calling for a review of market structure for some time, but let’s be careful not to try to fix things that may not be broken,” he said. “The retail investor is getting a better deal than they ever have.”

It looks like a lot has changed since 2004.

Citadel was able to identify how advantageous PFOF was and ultimately decided to weaponize it themselves.

Should the SEC ban PFOF?

What are your thoughts on Citadel’s statements versus where the company stands today with the practice?

Also Read: How Bloomberg’s Beloved Citadel Securities Manipulates the Market

Market News Published Daily

Market News Today: Citadel said payment for order flow creates conflicts of interest in 2004.
Market News Today: Citadel said payment for order flow creates conflicts of interest in 2004.

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Hedge Funds Lost $208 Billion in 2022 for Clients

How much money did hedge funds lose last year
Market News: Hedge Fund losses in 2022.

(Reuters) In 2022, when fears of rising interest rates and geopolitical uncertainty weighed on markets, investment firms that focused on trading strategies and bet on macroeconomic trends reaped gains.

Those with strategies linked to market moves stumbled.

Last year will mostly be remembered as a tough one, with the broader S&P 500 (.SPX) index losing 20% and blue chip hedge fund managers like Tiger Global and Third Point nursing losses.

Tiger Global was on the brink of collapsing all last year as it struggled to stay afloat.

Overall, hedge funds lost $208 billion in 2022 for clients, marking the biggest single-year decline since 2008, when they lost $565 billion, LCH data showed.

Hedge funds, which were jointly managing $3.3 trillion on Dec. 31, 2022, according to eVestment data, often promise to outperform, especially when markets are stumbling.

And according to WSJ, short sellers were down $81 billion by the end of January this new year after stocks rallied.

Goldman says bigger short squeezes are coming since the ‘meme stock’ frenzy.

Still, the direction of the market in 2023 is uncertain as recession talks loom.

Few Hedge Funds Survived 2022

Hedge Fund Losses 2022 - Citadel Securities Ken Griffin thanks Redditors.
Hedge Fund Losses 2022 – Citadel Securities Ken Griffin thanks Redditors.

The 20 best performing hedge fund managers earned $22.4 billion for investors in 2022, marking their slimmest gains since 2016 as many firms, including Tiger Global Management, struggled with slumping financial markets, LCH Investments data show.

Citadel’s gain of $16 billion last year was the largest annual gain ever made by a hedge fund manager, LCH said.

The top 20 managers, led by Ken Griffin’s Citadel, Bridgewater Associates and D.E. Shaw Group, made less than half of the $65.4 billion the group returned in 2021 when rising stock prices led to a record return.

In comparison, they made $63.5 billion in 2020 and $59.3 billion in 2019.

“Redditors, thank you so much for helping create the best pipeline we’ve ever had”, said Ken Griffin on Business Insider.

Ken Griffin, on how the GameStop frenzy helped raise Citadel’s profile with potential hires.

The GameStop affair, in an odd twist, actually helped boost Citadel’s clout with potential recruits, Griffin said.

“For a lot of people this was a wake-up call that this firm Citadel is actually one of the most important players in the world’s financial markets,” he told Business Insider.

“Redditors, thank you so much for helping create the best pipeline we’ve ever had.”

Citadel Securities had to receive a $1.2 billion lifeline from partners Sequoia and Paradigm in the beginning of 2022.

In March, the hedge fund froze customers from being able to withdraw their money.

Read: Disney Lays Off 7,000 as Streaming Services Tank

Market News Published Daily

Market News Today - Hedge Fund losses 2022 report.
Market News Today – Hedge Fund losses 2022 report.

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Citadel High Frequency Trading: Fined by Korea’s Regulators

Citadel High Frequency Trading: Fined $9 Million by Korea's Financial Regulators
Market News: Citadel Securities is fined $9 million by South Korea’s financial regulators.

(Reuters) South Korea’s financial regulator has imposed a fine of 11.88 billion won ($9.66 million) on U.S.-based Citadel Securities, saying it disturbed the local stock market with high-frequency algorithm trading.

The Financial Services Commission (FSC) said in a statement released on Thursday the firm had distorted stock prices with artificial factors, such as orders on the condition of “immediate or cancel” and by filling gaps in bid prices.

The firm carried out such trading on an average of 1,422 stocks per day from Oct. 2017 to May 2018, totaling more than 500 billion won worth of trades, according to the statement.

The Commission said it was the first time it had imposed fines on such high-frequency trading on the South Korean stock market, which has a high proportion of retail investors and little competition among algorithmic traders.

It added the firm did not provide algorithm source codes in the consultation process.

The regulator declined to identify the brokerage in violation but Citadel Securities confirmed it had been awaiting a decision, although it had yet to hear directly from the Commission.

“Citadel Securities works diligently to follow all applicable laws, regulations, and rules in jurisdictions in which we trade,” it said in a statement. “We strongly believe our trading complied with both Korean laws and global norms. We disagree with the FSC’s decision relating to our trading activity more than five years ago and will be seeking to appeal the decision.”

Citadel Securities was surprised and concerned to see that the regulator’s findings include references to a number of hearings the firm itself was not invited to participate in and supposed expert evidence that was never shared with the company and that it never had an opportunity to respond to, a source familiar with the situation said.

Citadel High Frequency Trading

CNN: Citadel high frequency trading in action – live.

High frequency trading takes advantage of investors and of the market itself.

One of the biggest manipulations in the market conducted by high frequency trading is spoofing.

Spoofing is a disruptive algorithmic trading practice that involves placing bids to buy or offers to sell futures contracts and canceling the bids or offers prior to the deal’s execution.

In December, Northwest Biotherapeutics sued Citadel Securities for spoofing their company stock.

The company is accused Citadel Securities LLC, Susquehanna, Virtu, and other Wall Street firms of driving its stock price down through the use of various illicit trading activities.

But this isn’t Citadel Securities first rodeo.

The hedge fund is under intense scrutiny from retail investors who say the company has too much power, allowing it to take advantage of retail trades through its payment for order flow and other manipulative tactics.

In 2015, an account operated in China by the brokerage arm of US hedge fund Citadel was suspended.

It was the latest casualty of regulators’ 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.

But Citadel has a long history of market manipulation.

This was only an earlier incident where Citadel and high frequency trading have been an issue in the past.

Market News Published Daily

Market News Today: Citadel Securities gets fined $9 million by Korea's financial regulators.
Market News Today: Citadel Securities gets fined $9 million by Korea’s financial regulators.

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

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