Ken Griffin’s Citadel Securities is cashing in on the day-trading boom by buying customers’ orders

FILE PHOTO: Ken Griffin, Founder and CEO, Citadel, speaks during the Milken Institute's 22nd annual Global Conference in Beverly Hills, California, U.S., April 30, 2019.  REUTERS/Mike BlakeReuters


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.

Read more: MORGAN STANLEY: The best-performing stocks for the end of recessions are loaded for surprising gains in the second half of the year. Here’s how to ready your portfolio in advance.

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.

However, day traders have piled into questionable stocks such as Hertz and JCPenney. Both companies have recently filed for bankruptcy; stockholders are typically wiped out in bankruptcy proceedings.

Read more: A 30-year market veteran explains why we’re in ‘one of the nutsiest bubbles in the history of bubbledom’ — and warns of an ‘underwater’ economy for the next several years

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.”

Read more: A notorious market bear says inexperienced ‘zombie investors’ are fueling a stock-market bubble — and warns that even the Fed won’t be able to prevent another 30% crash

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