Citadel Securities LLC is an American market making firm headquartered in Miami. It is one of the largest market makers in the world, and is active in more than 50 countries. It is the largest designated market maker on the New York Stock Exchange. Citadel Securities is a separate entity from the hedge fund Citadel LLC, although both were founded and are majority owned by American hedge fund manager Kenneth C. Griffin. Citadel Securities is expected to eventually move its headquarters from Chicago to Miami, having bought land there to build its new headquarters.
History
2000–2010
Citadel Securities was formed in 2002, as a market maker, providing liquidity and trade execution to retail and institutional clients. In 2008, Citadel Securities hired 70 people and Rohit D'Souza, a banker from Merrill Lynch, who left after eight months "to build an investment bank" and brokerage. By August 2011, Citadel ended its foray into investment banking to instead focus on electronic trading and market making.
2011–2019
In 2014, the firm expanded its market-making offering to interest rate swaps, one of the most commonly traded derivatives. Analysts of U.S. financial markets have been critical of the SEC's decision to exclude Citadel Securities from its 2014, Regulation Systems Compliance and Integrity (Reg SCI) regulatory regime designed to make U.S. securities markets safer for investors; both Citadel and the SEC declined to comment on Citadel's being exempted from complying with this rule. In August 2014, Citadel was fined $800,000 for irregularities in its trading practices between March 18, 2010, and January 8, 2013. Over a two-year period until September 2014, hundreds of thousands of large OTC orders were removed from its automated trading processes, rendering the orders "inactive" so that they had to be handled manually by human traders. Citadel Securities then "traded for its own account on the same side of the market at prices that would have satisfied the orders," without immediately filling the inactive orders at the same or better prices as required by FINRA rules. By 2015 Citadel Securities had become the world's largest interest-rate-swap trader by number of transactions replacing Wall Street banks. In January 2017, Citadel was fined $22 million by the SEC for misleading clients regarding the way it priced trades. In October 2018, Bloomberg reported that 40% of Robinhood's revenues were derived from selling customer orders to firms such as Citadel Securities and Two Sigma Securities. In December 2018, Citadel was forced by the SEC to pay $3.5 million over violations stemming from incorrect reporting for nearly 80 million trades from 2012 to 2016.
2020–present
2020
In January 2020, Citadel paid a 670 million-yuan ($97 million) settlement for alleged trading irregularities dating from 2015. During the coronavirus pandemic, the firm doubled its profit while generating $4 billion in revenue during the first half of 2020 due to an increase in volatility and retail trading. In 2020, Citadel Securities was censured by FINRA a total of 19 times for a variety of misconduct, including failing to close failure-to-deliver positions, naked short selling, inaccurate reporting of short sale indicators, executing trades during circuit-breaker halts, and failing to offer its clients best prices on the bid-ask spread. Citadel Securities was fined $700,000 by FINRA in July for trading ahead of customer orders. They delayed certain equity orders from clients to buy or sell shares while continuing to trade the same stocks in its own account as part of its market-making activities, according to FINRA. In October, Citadel Securities announced it would acquire the NYSE market making unit of rival IMC. The purchase made it the largest designated market maker (DMM) on the NYSE — overseeing over 1,500 NYSE-listed securities. In the same month, Citadel Securities filed a lawsuit against the Securities and Exchange Commission over the SEC's decision to approve a new "D-Limit" order type for IEX.