4 ms·
> Finally, the GameStop fiasco was unforgivable and only a naive fool would accept the explanation given. Citadel is the MAJORITY of Robinhood revenue and was o
by this_user 5y ago
> Finally, the GameStop fiasco was unforgivable and only a naive fool would accept the explanation given. Citadel is the MAJORITY of Robinhood revenue and was opposite that trade.
Only someone who doesn't understand how any of this works would believe these absurd conspiracy theories.
1) Citadel is one of FIVE of wholesale market markets RH use. Even if they did refuse to accept orders for GME, why wouldn't their four main competitors not happily accept them if it meant blowing up the biggest player in the field? They have no incentive to help Citadel. In fact, they have a clear financial incentive to do the opposite.
2) Why would RH care if Citadel went away? Citadel is one of their five 'suppliers' if you will. If Citadel disappeared overnight, RH would just route their order to the others. It makes absolutely no difference to them. They just route to whoever currently pays the most for orderflow.
3) RH customers are extremely small players with next to no capital between them. Cutting them off makes no difference, because it was professionals with real money driving the squeeze at that point. They recognised that they could make a ton of money, and put a bunch of competitors out of business in the process, so they kept hammering the stock.
4) The claim that Citadel itself even had a GME short position (beyond their MM inventory) is baseless. Citadel Advisor's previous 13F filing shows that they were outright LONG GME stock, were LONG GME calls, and were LONG GME puts. So while those puts will have lost money, the other two positions will have GAINED MASSIVELY during the squeeze. Their short exposure was mainly via the money that they lent to Melvin Cap during the squeeze.
- jimmydorry 5y agoI'm not GP but you are missing the most important fact: a bit over 10% of Robinhood's base revenue was PFOF. Of that more than 10%, the top 3 (~75% of the total) paying them were Citadel, Susquehanna and Wolverine. Losing PFOF from Citadel alone means kissing away more than 5% of their _revenue_. With essentially no cost associated with PFOF, these payments account for a large portion of their profit.
- loeg 5y agoThey would just sell that order flow to the next highest bidder. It would be a marginal, not total, loss.
- alasdair_ 5y agoPart of the problem is that Citadel had insight into the RH order flow before the rest of the market. Normally this wouldn’t matter but this also meant they get to see orders to buy GME went from <lots> to zero in an instant. Given their position on the other side of that trade, this advance warning (potentially) let them take that fact into account before anyone else and thus trade accordingly. RH stopping all GME purchases was market-moving news and citadel got to know before anyone else, to the detriment of those RH users that were long GME.
- capitalsigma 5y ago> RH stopping all GME purchases was market-moving news and citadel got to know before anyone else, to the detriment of those RH users that were long GME. Yes, that is the point of paying for order flow. That is doubtless why RH users don't pay commissions.
- bidirectional 5y agoNo it's not, payment for order flow allows market makers to fill non-market-moving customers at better prices, capturing the spread. You're spreading harmful misinformation.
- bumblelad 5y agoYou can skim the S-1 and see why that is problematic. In 2020, 34% of their revenue came from Citadel. 75% of their entire revenue stream comes from forwarding their clients' orders to one of FOUR market makers like Citadel. This practice in and of itself is contentious, and they readily admit this in their risk factors section of the filing. They also readily acknowledge the absolute thrashing they would receive financially if even one of the four market makers decide to not do business with them. Of these four, Citadel is the largest.
- thedudeabides5 5y agoI’m sure if they could sell that order flow to 1000 institutions, they would
- tptacek 5y agoIs your suggestion that PFOF is "contentious"? Because practically all retail traders are customers of brokers that get rebated for sending trades to firms like Citadel. Even IB does on their normal plans. Message board people believe a lot of weird things about how markets work.
- bumblelad 5y agoIt's contentious in the sense that there's a non-zero probability that the SEC could step in and ban that practice, which is something that Robinhood outlines in their S-1 filing under the risks section. >Message board people believe a lot of weird things about how markets work. Message board people also love reading comments and not looking at the articles they're typically commenting about.
- deleted 5y ago[deleted]