Ken Griffin
Photographer: David Paul Morris / David Paul Morris
Photographer: David Paul Morris / David Paul Morris
The name is a key word for power on Wall Street. But all of a sudden, he was in the White House information room: “Fortress.”
Given the wild stock market show involving GameStop Corp., last week’s question for the new press secretary was: would Janet Yellen, now secretary of the Treasury, give up on this issue, given the hundreds of thousands of dollars she takes? tightly talking fees from the Citadel?
For people outside the financial circles, the answer – Yellen is a professional, nothing to see here – was probably less surprising than the fact that the Citadel appeared at all. But in the true story of GameStop and Robinhood, the 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 a position of authority has officially accused the Citadel of wrongdoing. But from Washington to Silicon Valley to Wall Street to cyberspace, the huge financial firm is at the center of many questions, including the big one: what happened on Earth?
Griffin, 52, began trading from the Harvard bedroom 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 disappearing during the 2008 financial crisis, the billionaire has now become the ultimate example of a money-rich archetype on Wall Street, against which it is easy to get angry.
Enter the retail bulletin with their “monthly” bets on GameStop, AMC Entertainment and other stocks. When Robinhood imposed restrictions on the trading of many of those companies last week, Redditors and politicians cried. The accusing fingers pointed at Griffin, a Republican mega-donor, for intriguing to eliminate the rebellion of individual investors – even if Citadel and the online broker denied any involvement of the billionaire in the decision.
All the roads in last week’s saga seemed to pass through the Citadel. The market maker, Citadel Securities, is one of Robinhood’s largest sources of revenue because it pays the fee-free trading app to manage its orders and fills them more than any other firm.
Meanwhile, the hedge fund – a separate entity from the market maker – together with Griffin and its partners jointly invested $ 2 billion in Melvin Capital, which lost 53% in January after being bled by a brief cut in shares, including GameStop.
“Definitely false”
No one could say why they were sure of Griffin’s hand in Robinhood’s decisions and gave a short, more probable explanation: the financial fragility of the brokerage. The deposits that Robinhood had to make for shares increased 10 times during the week.
Read more: Robinhood’s Meteoric Rise Feels attracting Wall Street physics
Congressman Rohit Khanna, a Democrat from California, asked Robinhood CEO Vladimir Tenev to answer questions about whether he discussed the company’s actions with someone in the Citadel and whether clearing houses restrict trade in coordination with hedge funds.
“There are people who say we have been forced to do this by the market makers we are targeting or other market participants and I just want to go out and say that this is definitely false,” Tenev said in -an interview on Bloomberg TV. He later reiterated that no market maker or other players had even asked him to restrict buying in GameStop or a handful of other high-volume names.
Texas Attorney General Ken Paxton has launched his own probe into Citadel, Robinhood and other brokers: “The apparent coordination between hedge funds, trading platforms and web servers to stop threats to their market dominance is shockingly unprecedented, and wrong. It smells of corruption, “he said said.
Paxton himself is being investigated for corruption on a separate issue, according to the AP, for which he denied committing wrongdoing.
The fortress denies even the indication of any suspicious behavior. “Citadel Securities has not instructed or otherwise instructed any brokerage firm to stop, suspend or limit trading or otherwise refuse to do business,” the company said in a statement. For its hedging fund, “Citadel is not involved in any decision of the retail brokers to stop trading in any way or is not responsible for it.”
Creating the market
Amateurs have found fertile ground to support conspiracies. They did not hesitate to throw Jeff Psaki, money manager at the Citadel, as proof of the dark arts at the firm. It began with claims 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 a person who knows him. But it worked, bouncing from chats to Twitter and more.
There were questions about Yellen’s plight from the Citadel – the more than $ 700,000 he received for the commitments the company has made over the past two years.
What is certain is that Griffin’s Citadel Securities plays a key role in trading on the stock market and probably earned a lot of money during the GameStop frenzy. The carmaker’s cars are built to thrive in days of uncertainty and high volume, many of which were in January: on Wednesday alone, $ 29 billion worth of GameStop shares changed.
Such a trading mania offers millions of chances to execute a transaction. Firms like Citadel Securities make money from the price difference between buying (or selling) a stock and then selling (or buying) it almost immediately. While the amount is tiny for any individual order – penny fractions – it adds up quickly in extreme moments.
“Citadel Securities witnessed an extraordinary level of retail trading last week,” the company said in a statement to Bloomberg. “Many times during the week, large brokerage firms depended on our ability to handle the flood of orders.”
“The more stocks I see, the more bread crumbs I take,” said Larry Tabb, an analyst at Bloomberg Intelligence. “Especially in the highly volatile name, spreads are wide, so I’m not necessarily crumbs anymore.”
Given this scenario, Robinhood’s decision to limit purchases of certain stocks “has more to do with compensation than execution,” he added.
– With the assistance of Annie Massa