SEC Charges Citadel Securities Over Short Sale Regulation Violations

The U.S. Securities and Exchange Commission (SEC) has announced settled charges against broker-dealer Citadel Securities LLC for non-compliance with Regulation SHO, a framework aimed at curbing abusive short selling practices. The regulation mandates broker-dealers to appropriately mark sale orders as either long, short, or short exempt. Such records play a pivotal role for regulators in monitoring and preventing illicit short selling activities.

Citadel Securities, based in Miami, has consented to pay a penalty of $7 million to settle the SEC’s charges. Citadel Securities LLC is a leading global market maker, specializing in equities, equity options, and interest rate swaps. The firm’s commitment to providing liquidity and transparency to the financial markets has established it as a key player in the industry.

The SEC’s order reveals that over a span of five years, Citadel Securities mislabeled millions of orders. Specifically, certain short sales were inaccurately labeled as long sales and vice versa. This discrepancy was attributed to a coding error within Citadel Securities’ automated trading system. Consequently, the firm relayed this flawed data to regulators, including the SEC, throughout this duration.

Mark Cave, Associate Director of the SEC’s Division of Enforcement, commented on the matter, stating, “Compliance with the order marking requirements of Reg SHO is vital in our regulatory endeavors to clamp down on market malpractices, such as ‘naked’ short selling.” He further emphasized the significance of the action against Citadel Securities, noting that non-adherence to Reg SHO’s stipulations can adversely impact the precision of a firm’s electronic records. This, in turn, can deprive the Commission of crucial market-related data.

The order has charged Citadel Securities for contravening Rule 200(g) of Reg SHO. While the firm has neither admitted nor denied the findings, it has agreed to a cease-and-desist order. This includes a censure, the aforementioned $7 million penalty, and specific undertakings. Among these are a written assurance that the coding error has been rectified and a comprehensive review of the firm’s computer programming and coding logic pertinent to the processing of relevant transactions.

The SEC’s inquiry into the matter was spearheaded by Seth M. Nadler of the SEC’s Home Office, with assistance from various divisions and units within the SEC. The investigation was overseen by Mr. Cave.

Disclaimer & Copyright Notice: The content of this article is for informational purposes only and is not intended as financial advice. Always consult with a professional before making any financial decisions. This material is the exclusive property of Blockchain.News. Unauthorized use, duplication, or distribution without express permission is prohibited. Proper credit and direction to the original content are required for any permitted use.

Image source: Shutterstock


Tagged : / / /

EDX Markets Debuts Cryptocurrency Trading Platform and Wraps Up Latest Investment Round

In a key milestone, EDX Markets has successfully kick-started its cryptocurrency trading operations and completed a fresh funding round. Based in Hoboken, New Jersey, EDX has been established as a trusted marketplace for digital assets, promoting safe and compliant trading through reliable intermediaries.

EDX has garnered the attention of major financial institutions, becoming the preferred cryptocurrency marketplace for industry leaders. The platform stands out with its non-custodial model designed to prevent conflicts of interest. It also offers benefits like enhanced liquidity, competitive quotes, and a retail-only quote, giving retail-originated orders a better pricing advantage. Currently, EDX supports the trading of well-known cryptocurrencies (mainly POW), including Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Bitcoin Cash (BCH).

Another milestone is on the horizon for EDX. Later this year, it plans to launch a clearinghouse, EDX Clearing, which will settle trades matched on EDX Markets. The clearinghouse will function as a central counterparty for trades, reducing settlement risks, promoting price competition, and increasing operational efficiency.

The launch of EDX and the forthcoming EDX Clearing comes on the heels of a successful new funding round. The round saw participation from strategic investors such as Miami International Holdings, DV Crypto, GTS, GSR Markets LTD, and HRT Technology. These firms join the platform’s founding investors, including heavyweights like Charles Schwab, Citadel Securities, Fidelity Digital AssetsSM, Paradigm, Sequoia Capital, and Virtu Financial. The newly secured funding will bolster the ongoing development of EDX’s trading platform and strengthen its market leadership position.

Jamil Nazarali, CEO of EDX, expressed his confidence in the platform’s potential and its ability to attract investors. He stressed EDX’s commitment to incorporating the best practices from traditional finance into the cryptocurrency market and hinted at the significant edge EDX Clearing will provide by improving competition and operational efficiency.


Tagged : / / / / / / / / / / / /

Fidelity, Schwab, Citadel Securities Launch New Crypto Exchange EDXM

Financial heavyweights, including Charles Schwab (SCHW), Citadel Securities, and Fidelity Investments, announced a launch of a new cryptocurrency exchange on Tuesday.

As per the report, the trio has collaborated on launching the cryptocurrency exchange called EDX Markets (EDXM).

The exchange is described to be a first-of-its-kind designed with a promise to offer safer, faster, and more efficient cryptocurrency trading. The exchange aims to eliminate expensive bilateral settlements by netting and settling trades through its blockchain network.

The EDXM’s trading platform will rely on the technology built by The Member Exchange (MEMX), a U.S. stock market owned by a group of financial firms, including some of EDX’s creators. This will enable the EDXM to scale its operation to serve retail and institutional investors in several markets.

The exchange will also be backed by ventures, including Citadel Securities, Paradigm, Sequoia Capital, and Virtu Financial.

Jamil Nazarali, the former global head of business development at Citadel Securities, is assigned to lead the EDXM exchange, serving as the CEO of the platform.

In a statement, EDX Markets’ board of directors said: “Crypto is a $1 trillion global asset class with over 300 million participants and pent-up demand from millions more. Unlocking this demand requires a platform that can meet the needs of both retail traders and institutional investors with high compliance and security standards.”

New-Found Interest in Crypto

Despite the fall of crypto prices this year, institutional interest in the market has remained high as institutions bring in fresh money and more money than retail can pour in. Established asset managers like Abrdn, Charles Schwab, and BlackRock recently took a hard look, seeking to secure a foothold in the market.

Last month, Abrdn, the U.K. investment group, bought a stake in digital assets exchange Archax. BlackRock opened a private trust offering institutional clients in the U.S. direct exposure to Bitcoin. Schwab also launched a crypto-linked exchange-traded fund (ETF).

Last month, South Korean securities companies (including Mirae Asset Securities and Samsung Securities) reportedly focused on the crypto industry, with plans to set up digital asset exchanges in the first half of 2023.

Early this month, SEBA Bank launched Ethereum staking services, an institutional-grade offering enabling clients to earn staking rewards on Ethereum.

Asset managers have become open to multiple futures of finance. They are increasingly embracing cryptocurrency as a legitimate way of hedging sophisticated investors’ portfolios, like other alternative assets such as Gold.

Some brands have circumvented the usual Bitcoin-first route and ventured into non-fungible tokens (NFTs), ETFs, and the metaverse.

Image source: Shutterstock


Tagged : / / / / /

Crypto VC Paradigm Invests in Citadel Securities or Crypto VC Paradigm Diversifies Into TradFi World or Crypto VC Paradigm Invests in Stock Market Maker Citadel Securities

Key Takeaways

  • The crypto investment fund Paradigm, alongside VC Sequoia Capital, has taken part in a $1.15 billion investment into Citadel Securities.
  • Citadel Securities accounts for over 25% of the volume traded in U.S. equities markets, but it has faced increasing scrutiny since Robinhood restricted trading of Gamestop shares last January.
  • The market maker giant might be planning to incorporate digital assets into its business.

Share this article

Paradigm is set to take part in a $1.15 billion investment into the electronic-trading firm, Citadel Securities, with one of the United States’ largest venture capital firms, Sequoia Capital. 

A $22 Billion Valuation

One of the most prolific crypto and Web3 investors, Paradigm, has diversified into the world of traditional finance. 

Today, Citadel Securities announced that it had secured a $1.15 billion investment from the crypto and Web3 investment firm Paradigm, alongside venture capital firm Sequoia Capital. This investment represents the prolific market maker’s first outside investment, and the minority stake sold by Citadel Securities valued the firm at approximately $22 billion. 

According to Citadel Securities CEO Peng Zhao, the firm’s partnership with Paradigm and Sequoia should allow it to scale the business into new markets and bring in more talent. Moreover, according to The Wall Street Journal, the money raised could pave the way for the business to go public via initial public offering.

Citadel Securities is separately managed from Ken Griffin’s $43 billion hedge fund Citadel, but it is still majority owned by Griffin. While the hedge fund billionaire Griffin has historically been skeptical of cryptocurrencies, and his firms have not traded in them, it seems likely that Citadel Securities will incorporate digital assets into its business at some point. The Co-Founder and Managing Partner at Paradigm, Matt Huang, said that the partnership between his firm and Citadel Securities takes place “as they extend their technology and expertise to even more markets and asset classes, including crypto.” 

Paradigm has an extensive crypto, Web3 portfolio that includes Coinbase, Cosmos, Uniswap, and Ethereum scaling solutions like Optimism and Aztec. In November 2021, the firm launched the largest crypto fund of all time, $2.5 billion dedicated to Web3 projects. 

Sequoia Capital is an American VC fund with around $80 billion in assets under management, and its investments include both Google and Airbnb before either firm went public. 

Citadel Securities, majority owned by Ken Griffin who beat out ConstitutionDAO with a $43 million bid on one of the original copies of the U.S. Constitution last November, is a market maker that accounts for approximately one quarter of the volume of shares traded on the U.S. stock market each day. While business has been good for the firm since the pandemic due to increased market volatility and trading, Citadel Securities faced scrutiny following the aftermath of the Wall Street Bets and Gamestop short-squeeze frenzy in January of last year. It was accused of—allegedly—playing a major role in the trading restrictions of Gamestop shares imposed by brokerages like Robinhood. 

The investment into the traditional markets trading firm by Paradigm marks a possible diversification from crypto-related assets, but that might change if Citadel Securities eventually does foray into the crypto markets. 

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and several other cryptocurrencies. 

Share this article


Tagged : / / / /
Bitcoin (BTC) $ 27,135.27 0.39%
Ethereum (ETH) $ 1,679.24 0.03%
Litecoin (LTC) $ 66.65 0.20%
Bitcoin Cash (BCH) $ 235.54 0.06%