Tag Archives: Citadel LLC

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Citadel and KCG Targets of DOJ

NEW YORK (Reuters) – Federal authorities investigating the market-making arms of the $25bil hedge fund Citadel LLC and broker KCG Holdings Inc, are looking into the possibility that the two giants of electronic trading are giving small investors a poor deal when executing stock transactions on their behalf.

The Justice Department has subpoenaed information from Citadel and KCG (formerly known as Knight Capital Group) related to the firms’ execution of stock trades on behalf of clients, according to people familiar with the investigation. FBI Director Jim Comey, the top cop for the US DOJ will ultimately oversee the investigation, as he does for all other DOJ matters. Prior to his current role as FBI Director,  Comey worked as the General Counsel to Westport, CT-based Bridgewater Associates,  the world’s largest hedge fund with $150bil (RAUM) and owned mostly by the firm’s Founder Ray Dalio, a trading guru who is known to have a particularly intense personality. But, that comes with the territory if you’ve built a personal fortune estimated at $15bil.  Chicago-based Citadel is steered by billionaire hedge fund manager Ken Griffin, whose estimated net worth of  $7bil is half of what Dalio purportedly has, but does include multiple luxury residences, whose total value is nearly $500 mil, and includes a $200mil NYC penthouse that he purchased in Q3 2015.

Intermission from news flash: For followers of Showtime’s drama-parody of the world where hedge funds cross paths with regulators aka Billions, you’ll get the joke. Meaning, the notion that a guy who first appeared as a rising federal prosecutor, working all the way up to White House level roles, then, by virtue of administration revolving doors, he finds his way down the yellow brick road into the private sector, where he manages to land a sweet job at a defense contractor and takes in $6mil after 5 years and then,  he finds Jesus [in Westport CT],  who is located at the peak of Hedge Fund Mountain. This is where  he makes nearly $10mil –pretty good pay for a former Elliot Ness–in less than three years as top lawyer to of all folks, the world’s biggest and most secretive hedge running $150bil (RAUM) for institutions and sovereign governments.  Wait! Now flash forward two seasons; that same guy is now the FBI Head who, in Season 2, Episode 1 goes after Apple Inc and threatens to waterboard Tim Cook unless he pries open the back of an iPhone belonging to a self-acclaimed follower of Daesh .  And now, Season 2, Episode 2,  our top cop is now going after a billionaire hedge fund manager who happens to swim in the same “billionated” pool of HF sharks as his former partner!  Memo To: Andrew Ross Sorkin–Are you writing this sh*t down?? P.S. New phrase above ie. ‘billionated’,  also pronounced billion-ated. Means: to be full of billions, to be inflated with material possessions that cost billions, to have your brain inflated with thoughts of self aggrandizement   because you are full of billions. Not to be confused with “Billionator”, which is the finance industry equivalent to “Terminator”…but we digress… back to the main story…citadel-fbi-marketsmuse

Authorities are examining internal data concerning the firms’ routing of customer stock orders through exchanges and other trading systems, to see whether they are giving customers unfavorable prices on trades in order to capture more profit on the transact

Symphony Scheme to Displace Bloomberg Chat is Challenged by Regulators

Fintech startup instant message platform Symphony is hearing the sound of trumpets coming from NY Regulators and Bloomberg-challenger backed by consortium of banks now being  questioned about deletion and encryption process.

MarketsMuse curators might be a little slow this week in view of following delayed post regarding the roll-out of the instant message chat platform built by a consortium of top banks and intended to displace their dependence on Bloomberg LP…but better late than never…As Symphony Communications Services prepares to launch its much-anticipated messaging service, New York’s financial regulator is raising questions about whether the system can assure that bank communication records will be preserved for overseers.  The following is courtesy of American Banker.

NY State Regulator Anthony Albanese
NY State Regulator Anthony Albanese

In a letter to Symphony CEO David Gurle (blog post title image), Acting Superintendent of the New York State Department of Financial Services Anthony Albanese asked for further information about Symphony’s document retention capabilities, policies and features.

Noting that “key evidence that regulators used to uncover and investigate” benchmark manipulation schemes has been found in chat rooms, Albanese expressed concern that some banks that are under investigation for rate-rigging are investors in Symphony and have indicated they plan to use it. The letter suggests that before firms begin using a new platform for market related communications, Albanese wants to be sure regulators will still be able to access and audit communications in the event that a firm may be involved in suspicious activity.

The regulator is taking particular interest in “data deletion, end-to-end-encryption, and open source features” of the Symphony platform, the letter said. Albanese said the department would also follow up with banks, requiring them to describe “how they will ensure that messages created using Symphony products will be retained.” The department said it plans to review banks’ responses about their plans to assess whether or not encryption could be used to obstruct regulatory and compliance review, whether firms plan to use deletion capabilities, and whether banks can ensure that employees won’t use open source capabilities “to circumvent compliance controls and regulatory review.”

In an emailed response, Symphony’s Gurley said the platform was designed with compliance in mind, and said the company plans to fully explain Symphony’s technology and its capabilities to regulators.

“Symphony is built on a foundation of security, compliance and privacy features that were built to enable our financial services and enterprise customers to meet their regulatory requirements,” the statement said, according to American Banker. “We look forward to explaining the various aspects of our communications platform to the New York Department of Financial Services.”

Led by Goldman, a group of financial firms invested $66 million in Symphony. The group, in turn, acquired Perzo Inc., a Palo Alto, Calif., company founded in 2012. Goldman, which led the investment among the financial firms, contributed its own internal-messaging developments to the venture.

In addition to Goldman, Bank of America Corp., Bank of New York Mellon Corp., BlackRock Inc., Citadel LLC, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, J.P. Morgan Chase & Co., Jefferies LLC, Maverick Capital Ltd., Morgan Stanley, Nomura Holdings Inc. and Wells Fargo & Co. invested in Symphony.