Ken Griffin, CEO of Citadel, dismissed the allegation that his company misused information obtained from its market-making operations as “absolutely false”.
Griffin spoke about her role in last month’s GameStop mania in an interview with CNBC on Friday, the day after Citadel and other market makers were scrutinized by Congress.
“I think there have been a number of misperceptions about the data we get from the brokerage community. In fact, a prominent US senator asked us specifically what personal identification information we get from retail investors. The answer is,” Griffin said. “Squawk Box” co-host Andrew Ross Sorkin.
Market makers like Citadel Securities pay e-brokers like Robinhood for the right to conduct client trades. The broker then receives a small fee from the market makers for the routed stocks, which can add up to millions with active customer trading. Robinhood received more than $ 221 million in “Order Flow Payments” in the fourth quarter of 2020.
However, market makers have been scrutinized for the information they can gain from the flows of private customers, particularly in connection with the GameStop trading turmoil. In some cases, critics have speculated how Citadel, which operates hedge fund and market-making operations as a separate company, might use this information.
“This conspiracy theory that we are one way or another some of the big tech giants with access to personal identification information is just wrong,” Griffin said. “We have a price, a quantity, a limit. This comes to us when we order from a retail broker.”
Citadel Securities exports around 40% of its total retail volume, Griffin told the House Financial Services Committee during the GameStop hearing on Thursday.
“We receive an order and, as the party having to perform that order, we look at the various options at the time of receipt in order to achieve the best execution for that order,” said Griffin. “We are not allowed to trade before this order. Any execution that we can achieve in the context of the market for the fulfillment of this order, we have to return to the private investor, sometimes even with our price improvement, which we add at the moment of execution.”
Griffin and the CEOs of Robinhood, Reddit and Melvin Capital were put under pressure by House committee members Thursday over the epic short squeeze of GameStop stock last month.
The Citadel chief defended a controversial way brokers make money and pay for the flow of orders, saying his company will adjust if new regulations prohibit the practice. Robinhood and Other Brokers Rely on “Pay for Order Flow” as their winning machine instead of commissions.
Griffin was also pressured over the relationship between Citadel Securities and Citadel, the hedge fund that injected Melvin Capital with $ 2 billion after it suffered heavy losses from the GameStop short sale. Griffin repeatedly denied that the company had anything to do with Robinhood’s decision to restrict trading with GameStop. Robinhood announced this in order to meet the capital requirements of its trade clearing firm.
Subscribe to CNBC PRO for exclusive insights and analysis as well as live business day programs from around the world.