Citadel Securities
| Company type | Private |
|---|---|
| Industry | Financial services, Market making |
| Founded | 2002 |
| Founder | Kenneth C. Griffin |
| Headquarters | Miami , United States |
Area served | Worldwide |
Key people | Peng Zhao (CEO), Kenneth C. Griffin (Founder, Majority Owner), Jim Esposito (President) |
| Products | Market making, Trade execution, Futures, Equities, Credit instruments, Options, Currencies, Treasury bonds |
Citadel Securities LLC is a prominent American market maker based in Miami, Florida. The company delivers liquidity and executes trades for both retail and institutional investors. Its trading portfolio includes futures, equities, credit instruments, options, currencies, and Treasury bonds. Notably, it holds the position as the largest designated market maker on the New York Stock Exchange.
Although Citadel Securities and the hedge fund Citadel LLC share the same founder and majority owner, hedge fund manager Kenneth C. Griffin, they function as separate entities. In 2022, the firm shifted its headquarters from Chicago to Miami, planning to establish a new office on Brickell Bay Drive. Since 2017, Peng Zhao, who joined the company in 2006, has been serving as CEO.
2000–2010
Founded in 2002, Citadel Securities began as a market maker focused on providing liquidity and trade execution services to both retail and institutional clients. In 2008, the firm expanded by recruiting 70 employees, including Rohit D'Souza from Merrill Lynch, aiming to build an investment banking and brokerage division. However, by August 2011, Citadel withdrew from investment banking to concentrate exclusively on electronic trading and market making.
2011–2019
In 2014, Citadel Securities broadened its operations to include interest rate swaps, an important segment of the derivatives market. Despite facing criticism for being excluded from the SEC’s 2014 Regulation Systems Compliance and Integrity (Reg SCI) framework, the company maintained steady growth. That same August, it was penalized $800,000 for trading violations occurring between 2010 and 2013 related to manually handling large over-the-counter orders while simultaneously trading for its own account on the same market side.
By 2015, Citadel Securities had become the leading global trader of interest-rate swaps by transaction volume, overtaking major Wall Street banks. The following year, it opened a Sydney office to enhance its international presence. In January 2017, the firm agreed to a $22 million settlement with the SEC over misleading disclosures concerning trade pricing.
In October 2018, Bloomberg revealed that Robinhood generated approximately 40% of its revenue by selling customer order flow to firms such as Citadel Securities and Two Sigma. Later that year, Citadel paid a $3.5 million fine to the SEC for inaccuracies in reporting nearly 80 million trades between 2012 and 2016.
2020
Throughout 2020, Citadel Securities received 19 censures from FINRA for various compliance failures including not closing failure-to-deliver positions, engaging in naked short selling, providing inaccurate short sale reports, trading during circuit breaker halts, and failing to offer best bid-ask prices. In July of that year, FINRA imposed a $700,000 fine on the firm for executing trades ahead of customer orders by delaying client equity transactions while simultaneously trading those stocks for its own account.
In January 2020, Citadel resolved allegations of trading irregularities in China with a settlement amounting to 670 million yuan ($97 million). Amid the COVID-19 pandemic’s market volatility and heightened retail trading activity, the firm doubled its profits and recorded $4 billion in revenue during the first half of 2020.
October 2020 marked Citadel Securities’ acquisition of the NYSE market-making division from competitor IMC Financial Markets. This move established Citadel as the largest designated market maker (DMM) on the NYSE with responsibility for over 1,500 listed securities. That same month, Citadel filed a lawsuit against the SEC challenging approval of a new "D-Limit" order type implemented by IEX.
Additionally in 2020, Citadel Securities extended its product offerings in Hong Kong by entering US Treasury and dollar interest rate swap markets.
2021
In February 2021, Maxine Waters, chairwoman of the House Financial Services Committee, expressed concerns about Citadel Securities' critical role potentially posing risks to the stability of the U.S. financial system. At a hearing on March 17, industry experts revealed that Citadel Securities handled approximately 26% of U.S. equity trading volume, processed nearly 47% of retail order flow, and served as the market-maker for 99% of the traded volume among 3,000 options listed in the U.S. In March, FINRA sanctioned Citadel Securities with a $275,000 fine for failing to properly report close to half a million Treasury transactions between 2017 and 2019, highlighting significant compliance shortcomings.
Gary Gensler, President Biden’s nominee for SEC Chair, voiced similar apprehensions regarding Citadel’s dominant market position, questioning how one entity managing 40-50% of retail order flow might affect capital pricing and execution quality. Analysts likened Citadel’s growth to "the Amazonization of listed markets," cautioning that such concentration could undermine competitive dynamics. Gensler reiterated these points during his May testimony before the House Financial Services Committee.
In the aftermath of the GameStop short squeeze, Senator Elizabeth Warren and other lawmakers scrutinized potential conflicts stemming from Citadel Securities’ payment-for-order-flow agreements with Robinhood and its $2 billion investment in Melvin Capital, a prominent short-selling firm. Ken Griffin, CEO and majority shareholder (holding 85%) of Citadel Securities, denied any misconduct amid speculation that the firm's incentives might align with those of short sellers.
A class-action lawsuit alleging collusion between Robinhood and Citadel was dismissed by a U.S. District Court in November 2021. Prior Congressional hearings had sharply criticized Citadel’s payment-for-order-flow arrangements with brokerages such as Robinhood. Furthermore, concerns were raised about possible regulatory conflicts due to Citadel’s recruitment of former SEC and CFTC officials and its connections to influential figures like Ben Bernanke and Janet Yellen.
2022–2024
By January 2022, Citadel Securities was managing more than 2,000 listed securities. In August 2022, the firm expanded its international presence by opening an office in Tokyo and announced intentions to introduce U.S. fixed income products in that market. Closing out 2022, the company reported record revenues reaching $7.5 billion, exceeding its prior year’s results. It also operated offices in Japan and conducted trading activities across more than 35 countries, executing over one-fifth of all U.S. equity trades while maintaining active positions in futures, options, currencies, and Treasury bonds.
In February 2023, Citadel Securities' Hong Kong entity received Qualified Foreign Institutional Investor (QFII) status from Chinese regulators, facilitating greater access to mainland China’s bond and equity markets. By June 2023, the firm had broadened its product suite to include corporate debt trading, offering investment-grade credit instruments to its clientele.
The SEC announced charges against Citadel Securities in September 2023 for breaches of Regulation SHO related to improperly marked sell orders from 2015 through 2020 caused by a programming error. The firm agreed to settle with a $7 million fine without admitting or denying the allegations.
In June 2024, Citadel Securities commenced trading Euro and Sterling interest-rate swaps while expanding its rates trading teams in London and Paris; Paris was designated as its central hub for European rates trading. In September 2024, Jim Esposito—formerly co-head of global banking and markets at Goldman Sachs—was appointed president of the company.
Performance
In 2012, Citadel Securities earned recognition for delivering dependable trading services characterized by reduced costs and narrower spreads. By 2015, Barron's had ranked Citadel Securities as the top firm for price improvement in both S&P 500 and non-S&P stock categories. According to the Wall Street Journal, approximately one-third of retail investor stock transactions in 2015 were executed via Citadel, accounting for about 10% of the company's total revenue.
Partnerships
Citadel Investment Group joined forces with the Chicago Mercantile Exchange in 2009 to develop an electronic venue for trading credit default swaps.
In January 2022, Citadel Securities secured $1.15 billion in funding from venture capital firm Sequoia Capital and cryptocurrency investor Paradigm Operations, which placed the firm's valuation near $22 billion.
The company has also partnered with various financial institutions to establish multiple exchanges such as the Members Exchange (MEMX), the proposed Texas Stock Exchange (TXSE), the cryptocurrency exchange EDX Markets (EDXM), and the FMX Futures Exchange.