Tag: Hedge Funds (Page 1 of 15)

“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.

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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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Big Hedge Funds Now Have to Report Losses in Real-Time

Market News Daily - Big Hedge Funds Now Have to Report Losses in Realtime.
Market News Daily – Big Hedge Funds Now Have to Report Losses in Real-Time.

The Securities and Exchange Commission (SEC) approved a rule on Wednesday that will require big hedge funds to report losses in near real-time.

Bloomberg says this marks a significant shift for an industry that tends to prize its secrecy.

“It also promises to add to businesses’ administrative headaches.

Until now, funds have generally had to report positions in quarterly public filings.”

Large hedge funds will have no more than 72 hours, or “as soon as practicable,” to tell the agency about extraordinary investment losses and major margin events.

The rule is part of a campaign by SEC Chair Gary Gensler to scrutinize private investments funds, whose wagers — both winning and losing — can reverberate through financial markets.

The SEC says the stepped-up reporting by hedge funds that oversee at least $1.5 billion in assets will let Wall Street’s main regulator, as well as the Treasury Department and other agencies in Washington, get a handle on swift-moving events that may pose systemic risks.

“Private funds have evolved significantly in their business practices, complexity and investment strategies,” Gensler said.

“Private funds today are ever more interconnected with our broader capital market.”

Wall Street Pushes Back

Market News Daily - Big Hedge Funds Now Have to Report Losses in Realtime.
Market News Daily – Big Hedge Funds Now Have to Report Losses in Real-Time.

Wall Street is fighting back and it’s no surprise.

Recently, a Citadel spokesperson deemed retail advocacy group “We The Investor” alongside founder Dave Lauer conspiracists.

Industry groups are already flagging concerns that the requirement to quickly report major events will pose its own operational challenges and could result in a deadline even shorter than the 1-day period initially proposed, says Bloomberg.

“While alternative asset managers do not pose systemic risk, we are sympathetic to efforts seeking to monitor risk throughout the financial system,” Bryan Corbett, president and chief executive officer of the Managed Funds Association, a trade group representing hedge funds, said in a statement.

He added that the group is concerned the new rules may “exacerbate stress on funds, harm investors, and increase market volatility without commensurate benefit.”

Hedge funds and private equity firms have consistently pushed back against any efforts by the SEC to expand the type of data they must confidentially disclose, arguing that it’s proprietary information that could fall into the hands of unauthorized users through a data breach or other slip-ups.

The forms contain some of the private fund industry’s most closely guarded secrets and are handled by a very small number of agency staff.

“The SEC has handled confidential market information since its founding,” Gensler told reporters after the commission’s vote, adding that the SEC’s leadership is focused on cybersecurity.

Related: Virtu Faces New Enforcement Action by the SEC

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Market News Today - Big Hedge Funds Now Have to Report Losses in Realtime.
Market News Today – Big Hedge Funds Now Have to Report Losses in Real-Time.

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Virtu Faces New Enforcement Action by the SEC

Market News Daily - Virtu Faces New Enforcement Action by the SEC.
Market News Daily – Virtu Faces New Enforcement Action by the SEC.

Market maker Virtu is currently facing new enforcement action by the Securities and Exchange Commission (SEC).

(WSJ) The firm disclosed last week that it is facing a potential enforcement lawsuit from the Securities and Exchange Commission.

Virtu disclosed in a quarterly filing after Friday’s closing bell that it had engaged in settlement discussions with the SEC about an investigation related to “information barriers policies and procedures” between January 2018 and April 2019.

The company first disclosed the probe in February. Its updated disclosure suggested that the SEC could be moving forward with a lawsuit.

Virtu said it “currently believes it may receive a Wells notice from the SEC,” referring to a type of letter that the agency’s staffers send to companies or individuals to inform them of a possible enforcement action.

A Virtu spokesman said the investigation was “primarily focused on an access controls weakness in one of our internal back office systems containing post trade information that theoretically could allow certain system users access greater than what was intended by our policies.”

“We have no reason to believe and have found no evidence that anyone ever made any improper use of any client information”, said Virtu.

SEC Fines Virtu for Abusing Dark Pools

In 2019, the SEC announced that Virtu Americas LLC (f/k/a KCG Americas LLC) agreed to pay $1.5 million to settle charges for failing to comply with Regulation SCI.

According to the SEC’s order, KCG Americas operated an alternative trading system, or ATS, commonly referred to as a “dark pool.”

An ATS that exceeds certain trading volume thresholds is required to comply with Regulation SCI.

The SEC order finds that KCG Americas implemented an automated system that was intended to keep its dark pool’s trading volume below the volume thresholds by discontinuing trading in particular securities before the thresholds were met.

KCG Americas relied on this system for more than a year and half.

However, according to the SEC’s order, the system did not function as intended, causing trading to exceed the thresholds that triggered the need to comply with Regulation SCI.

The SEC’s order finds that Virtu willfully violated the policy and procedure.

Without admitting or denying the SEC’s findings, Virtu consented to the entry of a cease and desist order and agreed to be censured and to pay a penalty $1.5 million.

Market News Published Daily

Market News Today - Is Amazon buying AMC Entertainment?
Market News Today – Virtu Faces New Enforcement Action by the SEC.

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Steve Cohen’s Point72 Buys 606,000 Shares of GameStop

Market News: Steve Cohen's Point72 Buys 606,000 shares of $GME stock.
Market News: Steve Cohen’s Point72 Buys 606,000 shares of $GME stock.

(Business Insider) Steve Cohen’s Point72 supersized its bet on Elon Musk’s Tesla last quarter and made an unexpected wager on GameStop (NYSE:GME) stock.

The billionaire investor’s hedge fund purchased nearly 878,000 Tesla shares, worth $108 million as of December 31.

It also held bullish call options on another 60,500 shares of the automaker at the year’s end, a Securities and Exchange Commission filing revealed earlier this week.

Cohen and his team scooped up 606,000 shares of the video-game retailer, a stake worth $11 million as of December 31.

In 2021, the New York Mets owner deactivated his Twitter account after receiving several threats from users during the ‘meme stock’ rally.

“I’ve really enjoyed the back and forth with Mets fans on Twitter which was unfortunately overtaken this week by misinformation unrelated to the Mets that led to our family getting personal threats,” Cohen said in a statement.

Cohen’s hedge fund, which managed nearly $19 billion in assets at the time, lost nearly 15% after retail investors caused shares of videogame retailer GameStop to surge in 2021.

The losses at Point72 are mainly due to the company’s investment in hedge fund Melvin Capital, which bet against GameStop and had to receive nearly $3 billion in emergency cash from two outside investors, one of which was Point72.

Melvin Capital shut its doors in June of 2022.

GameStop News Today

Market News: Latest GME stock news.
Market News: Latest GME stock news.

Today, GameStop shareholders are looking to recreate the events that occurred in 2021 when stocks soared to all-time highs.

One creative way ‘apes’ are fighting Wall Street in 2023 is by registering their shares via a Direct Registration System, or DRS.

The company says at least 30% of its shareholders have registered their shares with the Direct Registration System (DRS) which equates to approximately 71.3 million shares.

The efforts from retail investors come as a means to prevent manipulative short seller attacks.

By registering their shares, company stock can no longer be lent out to short sellers.

$GME stock is up more than +25% this year-to-date.

Related: Will DRS Trigger a GameStop Short Squeeze?

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Market News Published Daily

Market News: Latest GME stock news.

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