Ken Griffin
Photographer: David Paul Morris / David Paul Morris
Photographer: David Paul Morris / David Paul Morris
The name is synonymous with power on Wall Street. But suddenly, there, in the White House Instruction Room, was also: “Citadel”.
Given the wild spectacle of the stock market involving GameStop Corp., the question for the new press secretary last week was this: Janet Yellen, now secretary of the Treasury, would withdraw from the subject given the hundreds of thousands of dollars she raised when talking about Citadel fees?
For people outside financial circles, the answer – Yellen is a professional, nothing to see here – was probably less surprising than the fact that Citadel came about. But in GameStop and Robinhood’s story it-is-true, Citadel, the financial empire ruled by billionaire Kenneth Griffin, has become a subject of fascination, speculation and, in some corners of the Internet, grass conspiracy theories.
No one in authority officially accused the Citadel of transgression. But from Washington to Silicon Valley and Wall Street to cyberspace, the giant financial company is at the center of many of the questions being raised, including the big question: what the hell just happened?
Griffin, 52, started trading in his Harvard dormitory and, three decades later, runs one of the largest hedge funds and one of the largest market makers in the world. On the verge of extinction during the 2008 financial crisis, the billionaire has now become the definitive example of a wealthy Wall Street archetype against which it is easy to get angry.
Join the furious retail crowd with your “up to the moon” bets on GameStop, AMC Entertainment and other actions. When Robinhood imposed trade restrictions on many of these companies last week, redditors and politicians shouted. Accusing fingers pointed at Griffin, a Republican mega-donor, for intriguing to end the rebellion of individual investors – even if Citadel and the online broker deny any involvement by the billionaire in the decision.
All roads in last week’s saga seemed to pass through the Citadel. The market maker, Citadel Securities, is one of Robinhood’s biggest sources of revenue, as he pays for the free trading app to handle his orders and serves them more than any other company.
Meanwhile, the hedge fund – a separate entity from the market maker – together with Griffin and his partners together invested $ 2 billion in Melvin Capital, which lost 53% in January after being bloodied by a small stock squeeze , including GameStop.
‘Categorically false’
No one could say why they were sure of Griffin’s participation in Robinhood’s decisions and they paid little attention to the most likely explanation: the broker’s financial weakness. The deposits Robinhood had to make for the shares increased 10 times during the week.
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Congressman Rohit Khanna, a California Democrat, asked Robinhood CEO Vladimir Tenev to answer questions about whether he discussed the company’s actions with someone at Citadel and whether clearing houses were restricting trade in coordination with hedge funds. .
“There are people saying that we were forced to do this by market makers we target or other market participants, and I just want to go out and say that this is categorically false,” said Tenev in an interview with Bloomberg TV. He later reiterated that no market maker or other players had even asked him to restrict purchase on GameStop or a handful of other high-volume names.
Texas Attorney General Ken Paxton launched his own investigation into Citadel, Robinhood and other brokers: “The apparent coordination between hedge funds, trading platforms and web servers to end threats to market dominance is shockingly unprecedented and wrong. It smells of corruption ”, he said.
Paxton himself is being investigated for corruption in another matter, according to the AP, for which he denied wrongdoing.
Citadel denies even the suggestion of any suspicious behavior. “Citadel Securities did not instruct or otherwise cause any broker to stop, suspend or limit 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 broker’s decision to stop trading in any way.”
Market Creation
Amateur detectives found fertile ground to foster conspiracies. They did not hesitate to choose Jeff Psaki, a financial manager at Citadel, as proof of the dark arts at the company. It all started with claims that Psaki, a former Goldman merchant, was married to White House press secretary Jen Psaki. He is not: he is a second cousin and has never spoken to her, said a person who knows him. But so it was, bouncing from chatboards to Twitter and more.
There were doubts about Yellen’s unexpected luck at Citadel – the more than $ 700,000 she received in lectures the company paid for in the past two years.
What is certain is that Griffin’s Citadel Securities plays a key role in trading in the stock market and probably made a lot of money during the GameStop frenzy. The market maker’s machines are built to thrive in days of uncertainty and high volume, which were many in January: on Wednesday alone, $ 29 billion in GameStop shares changed hands.
This trading craze offers millions of chances to trade. Firms like Citadel Securities make money from the price difference between buying (or selling) a stock and almost immediately selling (or buying) it. Although the value is minuscule for any individual order – fractions of a penny – it increases rapidly in extreme times.
“Citadel Securities witnessed an extraordinary level of retail trading last week,” the company said in a statement to Bloomberg. “Many times throughout the week, large brokerage houses depended on our ability to handle the deluge of orders.”
“The more stocks they see, the more bread crumbs they get,” said Larry Tabb, an analyst at Bloomberg Intelligence. “Especially in highly volatile names, spreads are wide, so they are no longer necessarily bread crumbs.”
Given this scenario, Robinhood’s decision to limit purchases of certain shares “has more to do with compensation than with execution,” he added.
– With the help of Annie Massa