Courtesy of Pam Martens
Citigroup Was Running the Above Dark Pools and Opaque Trading Venues in 2014
Last Friday, the Securities and Exchange Commission issued a 372-word press release that carried the title SEC Charges Citigroup for Dark Pool Misrepresentations. Buried within that press release was a brief sentence casually mentioning that a division of Citigroup had “failed to register as a national securities exchange.”
Since the thrust of the SEC’s press release was that the big travesty Citigroup had committed was to allow high frequency traders to operate within one of its Dark Pools while lying to its customers about that, this became the sole focus in multiple news articles on the matter. See here and here.
The SEC also buried the information that Citigroup was running an illegal stock exchange within its cease-and-desist order and settlement document. In fact, what the SEC actually did was to dump two vastly different violations of security law – lying to customers and running an illegal stock exchange – into one enforcement announcement and impose a meaningless $12.9 million fine on Citigroup for disparate violations. (Citigroup reported profits of $4.5 billion in its most recent quarter.) Equally notable, the SEC did not force the serially-charged Citigroup to admit to its violations of law.
According to the SEC’s order, “from at least December 2011 to April 30, 2015,” a unit of Citigroup called Citi Order Routing and Execution, LLC (CORE) operated as a stock exchange “by virtue of providing Citi Match as a marketplace for NMS [National Market System] stocks.” During that more than 3-year period when CORE was operating as an illegal stock exchange, without ever registering with the SEC as an exchange, Citi Match executed more than 7 billion shares of stock according to the SEC order. That’s a lot of stock to be trading without any regulatory eyes watching over you. One has good reason to wonder just how much of that stock was Citigroup’s own bank shares – a topic not even touched upon by the SEC order. (See Wall Street Banks Are Trading in their Own Company’s Stock: How Is This Legal?)
Citigroup’s CORE division was previously known as Automated Trading Desk Financial Services (ATD). The ATD name was used through at least May 16, 2016 when Citadel Securities announced that it was buying certain undisclosed assets of ATD from Citigroup for an undisclosed amount of money.
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