The bottom line here: there was a high probability that no matter what online brokerage firm Redditors sent their GameStop orders to initially, Ken Griffin’s Citadel Securities was getting a piece of the action in the end.
By Pam Martens and Russ Martens of Wall Street on Parade.
Since 2000, the Securities and Exchange Commission has required brokerage firms to file a quarterly report showing where they are routing their stock trades for execution. The filing is known as a 606 report after Rule 606 of Regulation NMS (National Market System). Because so many traders at Reddit’s WallStreetBets’ message board have focused on the fact that billionaire Ken Griffin’s Citadel Securities was executing the majority of trades for Robinhood, the trading app where a lot of the Redditors directed their GameStop trades, we decided to take a look at what other online brokers might have also been directing GameStop trades to Citadel Securities.
According to the 606 reports for the fourth quarter of 2020 for the following nine online brokers, Citadel was providing payment-for-order-flow (giving a cash rebate for trade orders directed to it) to each of the following: Robinhood, E-Trade, TD Ameritrade, Charles Schwab, WeBull, Ally Invest Securities, First Trade and TradeStation. At Fidelity Brokerage Services, it was directing stock and option orders to Citadel Securities but was only receiving payment-for-order-flow on the option orders, according to its 606 report.
According to these 606 reports, Citadel ranked as the number one venue for sending both stock and option orders at the following firms: Robinhood, TD Ameritrade, Charles Schwab, WeBull, Fidelity Brokerage Services and Ally Invest Securities. Citadel was the number one venue for options trades by E-Trade while ranking lower for stock trades. At First Trade and TradeStation, Citadel ranked number one for market orders for stocks (trades with no stated price limit) and number one for options.
The bottom line here: there was a high probability that no matter what online brokerage firm Redditors sent their GameStop orders to initially, Ken Griffin’s Citadel Securities was getting a piece of the action in the end. According to the website of Citadel Securities, “To maximize trading opportunities for clients, our automated trading platform sources liquidity from all U.S. exchanges and more than 18 alternative liquidity venues.”
That last sentence is what investigators want to look at. That is, what is the final destination of all of these Citadel Securities trades. “Alternative liquidity venues” may include Dark Pools which are in desperate need of some sunshine. (See GameStop Shares: Dark Pools Owned by Goldman Sachs, JPMorgan, UBS, et al, Have Made Tens of Thousands of Trades.)
Pay to play in the trading world has worked out very well for Griffin. According to Forbes, as of today, Griffin’s net worth is $15 billion. Forbes reported Griffin’s wealth at just $7.6 billion less than five years ago.
All that dough sloshing around in Griffin’s bank accounts has found some interesting destinations. Just ask U.S. Treasury Secretary Janet Yellen. Citadel paid Yellen $992,500 for speaking gigs since she stepped down as Fed Chair in February of 2018. Two of those events, on October 17, 2019 and December 3, 2019, commanded $292,500 each. Then, at the height of the pandemic in October 2020, Citadel paid Yellen $337,500 in total to speak at unspecified events on October 9; October 20; October 26; and October 27. Yellen’s disclosure form also lists a liability to Citadel of “$50,001 to $100,000,” owed as a refund for a cancelled event. Why she hasn’t paid that back yet is curious.
All of this comes from the jaw-dropping financial disclosure form that Yellen filed with the (try to contain your laughter) Office of Government Ethics in advance of her Senate Finance Committee Confirmation Hearing to become the U.S. Treasury Secretary…