Since the beginning of meme mania, with the first short squeeze of GameStop stock (GME) – Get Report, hedge fund Citadel Investment LLC and market maker Citadel Securities have been a source of discontentment, to put it mildly, within the apes community.
Today, Wall Street Memes explains the case and shows how much of a headache Citadel may be causing AMC “hodlers”.
(Read more from Wall Street Memes: AMC Stock: A Test For Diamond Hands)
Some background first
Citadel Securities is the largest market maker in the U.S., being responsible for executing approximately 25% of the volume of U.S. listed equity options. Since 2015, it has been the largest interest-rate swap trader in the world by number of transactions, surpassing the largest U.S.-based banks.
The firm also handles 13% of the consolidated volume of equities in the United States and 28% of the volume of retail equities — which includes the ape community.
Various regulatory issues
Citadel has built a track record of successive regulatory problems. Since 2014, the company has accumulated multi-million fines related to trading irregularities, such as lack of transparency with its clients about the way it conducts trades.
Between delays in order processing in favor of its market making activities to FTD (fail-to-deliver) and naked shorting, it is not hard to see why apes have been on Citadel’s case lately.
(Read more from Wall Street Memes: AMC Stock: Hot Topics On The Planet Of The Apes)
Robinhood joins the game
Brokerage firm Robinhood, which has been popular recently among retail investors, was a key player in the “gamification” of more complex trades. Some have criticized the firm for exploiting novice investors, disregarding the high risk involved in certain transactions.
The broker reports that a large part of its revenues have come from PFOF (payment-for-order-flow), which is compensation received by brokers in the execution of trades. This way, Robinhood can offer commission-free services to retail investors, attracting millions of young clients that are new to investing and trading.
In March 2021, Citadel entered the scene. PFOF agreements between Citadel and Robinhood were the target of severe criticism when GME’s first short squeeze case ended up in Congress. The arrangement between the firms was, rightfully so, perceived to be a conflict of interest.
Citadel at the center of the debate
The recent issues associated with Citadel cast doubt on whether its business practices have been systematically impacting the market and its proper functioning. Case in point, naked shorting and dark pool trading appear to be key factors in how AMC (AMC) – Get Report stock has traded this year.
A widely debated comment by investment Manager Peter Hann, CFA has added credibility to speculations that Citadel might be nudging AMC share price, whether willingly or not. According to him:
“Citadel is a market maker [that along with] their friend Virtu control 80% of retail orders. They can more or less dictate price on slow volume days. [There are] allegations of buy orders being delayed as much as 35 days through Citadel’s data flow. Dark pool trading accounted for over 65% of volume for the last five trading days and over 50% over the last month.”
A possible solution for this issue might need to come from regulators like the SEC, which is another frequent target of apes’ fury. Until a deeper investigation takes place, the subject will remain within the realm of conspiracy theory – and a pain in the neck for the ape community.
Wall Street Memes has recently asked the apes about the possibility of AMC shares reaching $100,000. Below are the results. Do you agree? Follow Wall Street Memes on Twitter and leave your comment.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)