Citadel securities, along with other hedge funds, have seemingly been under the microscope by the SEC this past year as they’ve been probed a number of times by the SEC, NYSE, and DOJ for their trading tactics. Most recently the Chicago based firm has been questioned by the NYSE for suspicious activity after Shopify (SHOP) share price spiked at the end of the trading day on March 18th for no apparent reason. The popular E-commerce company Shopify’s share increased $100 per share, reaching $780 per share in the last hour of the trading day and crashed back down right after the bell. The erratic swing of the stock price took investors by surprise and the NYSE management is now trying to figure out exactly what happened. Retail investors increasingly are losing trust in Citadel Securities. The online social media communities believe that Citadel continues to get away with illegal trading practices and are patiently waiting for the day when hedge funds are held accountable.
While the NYSE is not making any accusations in this matter as of yet, they do want to know what exactly happened to cause the jump in the Shopify share price. Citadel appears to have connections to the surge of the stock price. On March 18th Citadel was block trading Shopify and had an order to purchase 600,000 shares of Shopify. Block trading is a trading tactic that is used by large firms so that they can make large trades without disrupting the market for retail investors. That being said, the market was clearly disrupted on March 18th with Shopify (SHOP) and retail investors certainly took notice.
CITADELS PAYS 22.6 MILLION FOR THIS
Although this could be just a minor timing error made by CEO Ken Griffin’s firm Citadel Securities, the retail investors are not impressed. Investors believe that Citadel has already been given enough chances when it comes to their trading practices. Publicly, Citadel has been fined 58 times for a variety of violations. The largest being a violation for misleading customers. This is shocking and makes us wonder what else is going on behind closed doors.
In 2017 Hedge fund Citadel Securities agreed to pay the SEC $22.6 million to settle charges of misleading customers about the way it priced trades. While Citadel did not admit nor deny the accusations, they did end up agreeing to pay — which tells retail investors all they need to know. The SEC says that between 2007-2010 Citadel was using two separate algorithms that failed to give investors the best price for their trades. The two algorithms accounted for 2.6 percent of the total number of their algorithm based retail orders and accounted for .6 percent of the total order flow. In simpler terms, the SEC found that the two algorithms that Citadel used, intentionally did not seek out the best trade prices for their customers. Citadel agreed to settle the charges for a whopping $22.6 million settlement payment.
WILL THE SEC PROTECT INVESTORS?
What is most frustrating to retail investors is that the Securities and Exchange Commission (SEC) is designed to protect investors. They do this by making sure trading practices are fair, trustworthy and efficient. If the SEC doesn’t start holding firms accountable for their trading practices, how can retail investors continue to invest their hard earned money? The AMC community has been fighting hard for a free and fair market for over a year now, but it seems like a uphill battle as Gary Gensler from the SEC has done little to nothing at this time.