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Kenneth Griffin, the founding father of Citadel Securities, mentioned he could be “fairly nice” if fee for order stream was banned because the controversial follow comes below growing scrutiny from securities regulators.
“Fee for order stream is a price to me,” Griffin mentioned, addressing The Financial Membership of Chicago on Monday. “So when you’re going to inform me that by regulatory fiat considered one of my main gadgets of expense disappears, I’m OK with that.”
Payment for order flow is the controversial follow by brokers of promoting trades made on their platform to market makers corresponding to Citadel Securities. It’s profitable for retail brokers corresponding to Robinhood and Charles Schwab, which use the follow to supply zero-commission inventory and choices buying and selling to their clients.
Within the yr to June 2021, Citadel Securities paid almost $1.5bn to brokers for his or her order stream, in response to regulatory filings collated by Bloomberg Intelligence, probably the most of any market maker.
Fee for order stream got here below a harsh highlight at the beginning of this yr when chaotic buying and selling by buyers organised by Reddit’s r/WallStreetBets web page made many conscious of the position Citadel Securities performs in dealing with buying and selling volumes from retail brokerages.
Citadel Securities is the most important US market maker, a enterprise that buys and sells securities and gives liquidity. It handles roughly 1 / 4 of all shares traded within the US, in response to the Chicago-based firm.
Workers on the US Securities and Alternate Fee are engaged on new suggestions on fee for order stream. Gary Gensler, SEC chair, has mentioned that the follow “might current a variety of conflicts of curiosity”, and has sought to research whether or not promoting retail trades delivers worth for retail clients.
Talking on the SEC’s curiosity, Griffin mentioned that if fee for order stream “disappeared tomorrow” he was “fairly nice with that”.
“Having considered one of my main price traces eradicated? I’m going to be a winner in that state of affairs,” he mentioned.
Griffin has been an outspoken defender of fee for order stream, saying that the follow’s position made buying and selling cheaper for patrons and was “good for everyone”.
He famous that whereas the rise of retail buying and selling “hasn’t all been good”, he warned that brokers would reintroduce commissions to clients if fee for order stream was banned, which “could be an enormous loss”.
“Allow us to hope that in Washington we keep the established order that brokerage corporations have an obligation to safe the very best execution they will for his or her clients,” Griffin mentioned in his deal with. “That’s the foundation on which we compete, and that’s the idea on which we win.”
Individually, Griffin mentioned that Citadel Securities wouldn’t commerce cryptocurrencies due to uncertainty over how it will be regulated. He known as crypto “a jihadist name that ‘we don’t consider within the greenback’”.
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