Citadel CEO Ken Griffin dismissed as "flat out false" the accusation that his agency improperly makes use of info it garners from its market-making
Citadel CEO Ken Griffin dismissed as “flat out false” the accusation that his agency improperly makes use of info it garners from its market-making operation.
Griffin spoke in an interview with CNBC on Friday, someday after Citadel and different market makers got here below scrutiny from Congress about their position in final month’s GameStop mania.
“I believe there’s been numerous misperceptions concerning the knowledge we obtain from the brokerage group. In truth, a distinguished U.S. senator requested us particularly about what private figuring out info can we obtain from retail traders. The reply is none,” Griffin advised “Squawk Field” co-host Andrew Ross Sorkin.
Market makers corresponding to Citadel Securities pay e-brokers like Robinhood for the best to execute buyer trades. The dealer is then paid a small payment by the market makers for the shares which might be routed, which may add as much as tens of millions when prospects commerce actively. Robinhood obtained greater than than $221 million in “cost for order movement” within the fourth quarter of 2020.
Nonetheless, market makers have come below scrutiny, particularly within the context of the GameStop buying and selling turmoil, concerning the info they can garner from the flows of retail shoppers. In some instances, critics speculated how Citadel, which runs hedge fund and market-making operations as separate enterprise models, may use that info.
“This conspiracy principle that we some how or one other are like a few of the large tech giants which have entry to non-public figuring out info is simply flat out false,” stated Griffin. “We’ve a worth, amount, a restrict. That is what involves us in an order from a retail dealer.”
Citadel Securities executes roughly 40% of all retail quantity, Griffin advised the Home Monetary Providers Committee on Thursday in the course of the GameStop listening to.
“We obtain an order and because the social gathering that has to execute that order what we have a look at in the intervening time of receipt is what are the varied choices that we’ve got to attain the perfect execution for that order,” stated Griffin. “We aren’t permitted to commerce in entrance of that order. Any execution that we will obtain within the context of the marketplace for fulfilling that order we should present again to the retail investor, typically even with our pricing enchancment that we add on in the intervening time of execution.”
Griffin, together with the CEOs of Robinhood, Reddit and Melvin Capital, had been pressed by members of the Home committee on Thursday relating to final month’s epic quick squeeze in GameStop’s inventory.
The Citadel chief defended a controversial methodology brokerages use to earn money, cost for order movement and stated his agency would adapt if new rules prohibited the observe. Robinhood and different brokers depend on “cost for order movement” as their revenue engine in lieu of commissions.
Griffin was additionally pressed concerning the relationship between Citadel Securities and Citadel the hedge fund, which injected $2 billion into Melvin Capital as soon as the latter took main losses from shorting GameStop. Griffin repeatedly denied the agency had something to do with Robinhood’s choice to limit buying and selling in GameStop. Robinhood has stated it did so so as to meet capital necessities from its commerce clearing agency.
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