Interesting reports are surfacing today around Ken Griffin’s Citadel Securities. The Securities and Exchange Commission (SEC) has reportedly fined Citadel $7 million for improperly marketing trades over a period of five years. A coding error has been cited as the reason for the mis-marking of short sales as long sales. Citadel noted that any such discrepancies were fixed within minutes. Additionally, these errors purportedly affected only a small percentage of trades.
Citadel noted in a statement, “While updating our systems to accommodate certain client requests, we made a coding change that inadvertently affected a de minimis percentage of our order markings. We detected the issue and promptly fixed it more than three years ago.”
Let’s dive into what investors may want to make of this news today.
Ken Griffin’s Citadel Fined by SEC
Interestingly, Citadel Securities is one high-frequency trading firm that has been embroiled in a number of controversies in recent years. Retail investors may remember the class-action lawsuit levied against Citadel for its alleged role in a payment-for-order-flow scandal with Robinhood (NASDAQ:HOOD). Additionally, Citadel provided Melvin Capital, a key short-seller of popular meme stocks, with a $2 billion loan at the height of the mania. While the U.S. District Court ultimately dismissed this case against both companies, certain investors still have an axe to grind with Citadel.
High-frequency trading and the existing payment-for-order-flow system, which allows for zero-fee trading has become commonplace. Indeed, while most discussion around this feature of the markets has died down, this fine has re-ignited some emotions for certain retail investors who may feel the system isn’t working for them.
The fact that Ken Griffin is back in the spotlight for this fine is noteworthy for those reflecting on previous events. That said, a $7 million fine for a firm worth tens of billions of dollars isn’t something that’s likely to move the needle. Alas, the SEC got a $7 million payday and it’s unclear if retail investors are any better off as a result.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
