Ken Griffin
Photographer: David Paul Morris / David Paul Morris
Photographer: David Paul Morris / David Paul Morris
The name is a proverb for power on Wall Street. But suddenly there was also in the White House Briefing Room: “Citadel.”
Given the wild stock market spectacle in which GameStop Corp. involved, the question to the new press secretary last week was the following: would Janet Yellen, now the treasury secretary, deny herself of the case given the hundreds of thousands of dollars she raised to speak fees from Citadel?
For people outside financial circles, the answer – Yellen a pro, nothing to see here – was probably less surprising than the fact that Citadel came up at all. But in the is-this-for-rights story of GameStop and Robinhood, Citadel, the financial empire run by billionaire Kenneth Griffin, has become a subject of fascination, speculation and, in some corners of the Internet, conspiracy theories with grass .
No one in a position of authority has officially accused Citadel of doing wrong. But from Washington to Silicon Valley to Wall Street to cyberspace, the giant financial firm lies at the center of many of the questions being asked, including the big one: what on earth has just happened?
Griffin, 52, started trading from his residence in Harvard, and three decades later he manages one of the largest hedge funds and one of the largest market makers in the world. On the brink of extinction during the 2008 financial crisis, the billionaire has now become the best example of a salaried Wall Street archetype that is easy to rage.
Enter the angry retailer with their ‘to the moon’ bets on GameStop, AMC Entertainment and other stocks. When Robinhood restrained many of those companies last week, Redditors and politicians cried foul. Accusing fingers point to Griffin, a Republican megadonor, for sly to quell the insurgency of individual investors – even though Citadel and the online broker did not deny any involvement of the billionaire in the decision.
It seems like all the roads in last week’s saga are going through Citadel. The market maker, Citadel Securities, is one of Robinhood’s biggest sources of revenue, as it pays for the free app to handle its orders and fills more of it than any other firm.
Meanwhile, the hedge fund – a separate entity from the marketer – along with Griffin and its partners invested $ 2 billion in Melvin Capital, which lost 53% in January after being bled by a brief push on shares, including GameStop.
‘Categorically False’
No one could say why they were sure of Griffin’s hand in Robinhood’s decisions, and they gave the faster explanation: the broker’s financial fragility. The deposits Robinhood had to make for shares jumped tenfold during the week.
Read more: Robinhood’s Meteoric rise Bird the pull of Wall Street Physics
Congressman Rohit Khanna, a California Democrat, asked Robinhood CEO Vladimir Tenev to answer questions about whether he had discussed the company’s actions with anyone from Citadel and whether the clearing houses restricted trade in partnership with hedge funds.
“There are people who say we’ve been forced to do so by market makers who target other market participants, and I just want to come out and say it’s categorically false,” Tenev said in an interview with Bloomberg TV. He later reiterated that no market makers or other players had even asked him to limit the purchase of GameStop or a handful of other large volumes.
Texas Attorney General Ken Paxton has launched his own investigation into Citadel, Robinhood and other brokers: ‘The apparent coordination between hedge funds, trading platforms and web servers to block threats to their market dominance is shockingly unprecedented and wrong. It stinks of corruption, “he said. said.
According to the AP, Paxton himself is being investigated for corruption on a separate matter, for which he denied.
Citadel even denies the hint of any suspicious behavior. “Citadel Securities has not instructed or caused any brokerage firm to suspend, suspend or restrict trading or otherwise refuse to do business,” the company said in a statement. For its hedge fund, Citadel is not involved in, or responsible for, any retail brokers ‘decision to stop trading in any way.’
Market Making
Amateurs have found fertile ground for conspiracies. They did not hesitate to throw out Jeff Psaki, a money manager at Citadel, as evidence of obscure arts at the firm. It began with allegations that Psaki, a former Goldman trader, was married to White House Press Secretary Jen Psaki. He is not: he is her second cousin and has never spoken to her, said someone who knows him. But it continued, ricocheting from chatboards to Twitter and beyond.
There were questions about Yellen’s windfall of Citadel – the more than $ 700,000 she received for speaking engagements for which the firm has paid for the past two years.
What is certain is that Griffin’s Citadel Securities plays a key role in stock market trading and probably made a lot of money during the GameStop frenzy. The manufacturers’ machines were built to thrive on uncertainty and large numbers of days, of which there were many in January: just Wednesday, $ 29 billion worth of GameStop shares changed hands.
Such a trading mania offers millions of opportunities to execute a trade. Companies like Citadel Securities make money from the price difference between buying (or selling) a stock and then selling (or buying) it almost immediately. Although the amount for each individual order – fractions of a cent – is small, it adds up quickly in extreme moments.
“Citadel Securities was at an extraordinary level in retail last week,” the company said in a statement to Bloomberg. “Over the course of the week, the big brokerage firms have many times relied on our ability to handle the deluge of orders.”
“The more stocks they see, the more breadcrumbs they take,” said Larry Tabb, an analyst at Bloomberg Intelligence. “Especially in extremely volatile names, the spreads are wide, so they are not necessarily more breadcrumbs.”
Given the scenario, Robinhood’s decision to restrict the purchase of certain shares “has more to do with clearing than with execution,” he added.
– With assistance by Annie Massa