Citadel Securities is an American market making firm headquartered in Miami.[1][2][3] It is one of the largest market makers in the world,[4] and is active in more than 50 countries.[5] It is the largest designated market maker on the New York Stock Exchange.[6][7] 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.[8] Citadel Securities is expected to eventually move its headquarters from Chicago to Miami, having bought land there to build its new headquarters.[1]
Citadel Securities was formed in 2002,[9][10][11] as a market maker, providing liquidity and trade execution to retail and institutional clients.[12] 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.[13] By August 2011, Citadel ended its foray into investment banking to instead focus on electronic trading and market making.[14]
In 2014, the firm expanded its market-making offering to interest rate swaps, one of the most commonly traded derivatives.[15] 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.[16] In August 2014, Citadel was fined $800,000 for irregularities in its trading practices between March 18, 2010, and January 8, 2013.[17] 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.[18] By 2015 Citadel Securities had become the world's largest interest-rate-swap trader by number of transactions replacing Wall Street banks.[19] In January 2017, Citadel was fined $22 million by the SEC for misleading clients regarding the way it priced trades.[20] 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.[21] 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.[22]