Citadel CEO Ken Griffin dismissed as “false” the allegation that his company misused the information it obtains from its market creation operation.
Griffin spoke Friday in an interview with CNBC, a day after Citadel and other market leaders were under Congressional control over their role in last month’s GameStop craze.
“I think there have been a number of misconceptions about the data we receive from the brokerage community. In fact, a prominent U.S. senator asked us specifically about what personally identifiable information we receive from retail investors. The answer is none, ”Griffin said.” Squawk Box co-host Andrew Ross Sorkin.
Market makers like Citadel Securities pay e-brokers like Robinhood the right to run client transactions. Market brokers pay the broker a small commission for the actions they take, which can add up to millions when clients actively operate. Robinhood received more than $ 221 million in “order flow payment” in the fourth quarter of 2020.
However, market makers have been subjected to scrutiny, especially in the context of GameStop’s commercial turmoil, over the information they can obtain from retail customer flows. In some cases, critics speculated how Citadel, which manages hedge fund operations and market creation as separate companies, could use that information.
“This conspiracy theory that some or others of us are like some of the big tech giants that have access to personally identifiable information is false,” Griffin said. “We have a price, a quantity, a limit. That’s what comes to us in an order from a retail broker.”
Citadel Securities executes about 40 percent of the total retail volume, Griffin told the House Financial Services Committee Thursday during the GameStop hearing.
“We receive an order and, as part of having to execute that order, what we look at at the time of receipt is what are the various options we have for getting the best execution of that order,” Griffin said. “We are not allowed to operate in the face of this order. Any execution we can achieve in the market context to fulfill this order must be returned to the retail investor, sometimes even with our price improvement which we add at run time “.
Griffin, along with Robinhood CEOs, Reddit and Melvin Capital, were pressured by members of the House committee on Thursday over last month’s epic short cut in GameStop shares.
The head of Ciutadella defended a controversial method used by brokers to make money, pay for the flow of orders and said his company would adapt if new regulations banned the practice. Robinhood and other brokers rely on “order flow payment” as a profit engine rather than commissions.
Griffin also insisted on the relationship between Citadel Securities and Citadel, the hedge fund, which injected $ 2 billion into Melvin Capital once it suffered significant losses due to its fall from GameStop. Griffin has repeatedly denied that the firm had anything to do with Robinhood’s decision to restrict trading to GameStop. Robinhood has said it did so to meet the capital requirements of its commercial clearing company.
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