- Ken Griffin’s Citadel Securities is cashing in on the day-trading boom, the Financial Times reported on Sunday.
- The market maker handles 40% of shares traded by individual investors in the US, the newspaper said, citing data from Piper Sandler.
- Citadel Securities has benefited from a surge in retail investing fueled by the advent of zero-commission trading and the coronavirus pandemic.
- Visit Business Insider’s homepage for more stories.
Citadel Securities, the sister firm of the billionaire Ken Griffin’s hedge fund, has emerged as one of the big winners of the day-trading boom.
Citadel Securities is the leading retail market maker, handling 40% of the shares traded by individual investors in the US, the Financial Times reported on Sunday, citing Piper Sandler data.
The firm purchases orders from the big US brokerages, takes the other side of the trades, and makes money on the spread, the difference between the price to buy and the price to sell.
While Citadel Securities is privately owned, its rival Virtu Financial reported a 267% year-on-year rise in market-making earnings from retail and institutional clients in the first quarter, the Financial Times said, giving a sense of Citadel Securities’ likely gains.
Virtu’s exposure to the day-trading boom has also spurred investors to send its shares up about 50% this year.
Retail investing has surged in recent months as people have been stuck at home during the coronavirus pandemic. Closed casinos and a lack of live sports have driven gamblers to the stock market, and the Barstool Sports founder David Portnoy has championed trading as a form of entertainment.
Easy access to zero-commission trading across platforms such as Charles Schwab, E-Trade, TD Ameritrade, and Robinhood has also boosted interest among amateur stock pickers.
Big-name investors and market commentators have called out the reckless behavior in recent weeks:
- The billionaire investor Leon Cooperman said some Robinhood traders were “doing stupid things” that would “end in tears.”
- The “Shark Tank” star Mark Cuban said the frenzy reminded him of the dot-com bubble.
- “Don’t be misled with false claims of easy profits from day trading,” Burton Malkiel, the Princeton economist and Wealthfront’s investment chief, said last week.
- Jim Cramer, the host of CNBC’s “Mad Money,” bemoaned that “everybody thinks they’re smarter than Warren Buffett.”