Business

Citadel Securities Faces New Pressure Over GameStop Frenzy

Billionaire

Ken Griffin’s

digital buying and selling agency, Citadel Securities, is underneath hearth once more over its function within the January buying and selling frenzy in shares of

GameStop Corp.


GME -5.74%

after new info surfaced in a lawsuit.

Citadel Securities in a press release Tuesday rejected “Web conspiracies and

Twitter

mobs” which have once more accused the agency of pushing

Robinhood Markets Inc.


HOOD -0.31%

and different brokerages to limit trading in GameStop and other meme stocks on Jan. 28, a transfer that resulted in losses for a lot of small traders.

The bizarre assertion got here because the hashtag #KenGriffinLied was trending on Twitter.

The furor was prompted by inner Robinhood communications made public final week as a part of a lawsuit filed by traders who have been affected by the buying and selling restrictions. The go well with is in search of damages from Robinhood and quite a lot of different brokerages, in addition to Citadel Securities and a few corporations that clear inventory trades.

The communications confirmed executives from Robinhood and Citadel Securities held discussions within the days earlier than the Jan. 28 transfer, when each corporations have been grappling with surging buying and selling volumes in meme stocks. Whereas the communications don’t make it clear what the corporations mentioned, they point out the talks have been acrimonious. In an inner chat message dated Jan. 27, the president of Robinhood’s stockbrokerage arm,

Jim Swartwout,

mentioned “you wouldnt consider the convo we had with Citadel. complete mess.”

Attorneys for the plaintiffs mentioned in a courtroom submitting final week that the communications confirmed Citadel Securities pressured Robinhood to curb small traders’ buying and selling.

Citadel Securities—which executes most of the orders submitted by Robinhood prospects—has denied exerting such strain. In February, Mr. Griffin, the agency’s founder and major shareholder, mentioned in written testimony to the Home Monetary Providers Committee that his agency “had no function in Robinhood’s choice to restrict buying and selling in GameStop or some other of the ‘meme’ shares.”

The buying and selling agency reiterated its stance on Tuesday. “Conspiracy theorists and plaintiffs’ attorneys are attempting to concoct an absurd story from regular-way communications amongst Citadel Securities and the brokers who deal with orders for retail traders,” Citadel Securities mentioned within the assertion.

The agency mentioned its discussions with brokerages in the course of the GameStop frenzy have been geared toward guaranteeing market stability. “Amid an unprecedented surge in retail buying and selling engagement, our respective groups made certain that operational calls for have been addressed and that retail traders had entry to Citadel Securities’ superior execution capabilities,” Citadel Securities mentioned.

A spokeswoman for Robinhood denied on Tuesday that Citadel Securities had pressured the brokerage to impose the buying and selling restrictions.

“These complaints try and create a false narrative of collusion, and we’ll work vigorously to proceed correcting the file with the info,” she mentioned. “In occasions of market stress, it’s regular and advisable for us to speak much more with our market facilities.”

Robinhood has mentioned that it imposed the Jan. 28 buying and selling curbs due to a $3 billion margin name that morning from the Depository Belief & Clearing Corp., which runs the clearinghouse of U.S. inventory trades. By imposing the boundaries, Robinhood decreased the sum of money it wanted to publish on the clearinghouse. The DTCC has corroborated Robinhood’s account.

GameStop’s inventory worth fell 44% on Jan. 28 after quite a lot of brokerages imposed the boundaries, which prevented many traders from shopping for the shares or including to their holdings. The worth of the videogame retailer’s inventory had rallied earlier, buoyed by a broad marketing campaign on Reddit and different social-media websites wherein traders touted GameStop and some different shares.

The episode has prompted a number of congressional hearings and is predicted to be the topic of a soon-to-be-released report from the Securities and Alternate Fee.

Digital buying and selling corporations reminiscent of Citadel Securities pay retail brokerages for the appropriate to execute their prospects’ inventory and choice orders, a observe referred to as fee for order stream. SEC Chairman

Gary Gensler

has mentioned the company is inspecting payment for order flow as a part of a broader overview of U.S. stock-market construction prompted by the meme-stock phenomenon.

Following the GameStop buying and selling frenzy, the SEC is predicted to take a contemporary take a look at fee for order stream, a decades-old observe that’s on the coronary heart of how commission-free buying and selling works. WSJ explains what it’s, and why critics say it’s unhealthy for traders. Illustration: Jacob Reynolds/WSJ

Write to Alexander Osipovich at [email protected]

Copyright ©2021 Dow Jones & Firm, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8


Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button