Courtesy of Pam Martens
The House Financial Services Committee has released its official Memorandum outlining the general topics it wants to cover in tomorrow’s hearing on the wild trading action in GameStop and other meme stocks in January that has raised serious questions about U.S. market integrity. The implosion of the Archegos Capital Management family office hedge fund in March, which has generated losses of more than $10 billion thus far at global systemically important banks, will likely be a key topic when the Senate Banking and House Financial Services Committees haul Wall Street bank CEOs to hearings on May 26 and 27, respectively.
An insightful paragraph in the Memorandum for the House hearing tomorrow reads as follows:
“Testimony given at the first two GameStop hearings raised concerns about the market dominance of some capital market participants, as well as correlated risks arising from the interconnectedness of certain financial institutions. For example, Citadel LLC is a multi-service hedge fund and financial services company and [its related] Citadel Securities LLC, is one of the largest market makers and, according to its website, executes ‘approximately 47% of all U.S.-listed retail volume.’ Citadel Securities also, reportedly, handles almost as much trading volume as Nasdaq. Further, Citadel Securities along with market maker Virtu Financial, ‘account for more of the overall equity market than the New York Stock Exchange.’ With respect to Citadel, some have raised concerns about a single market maker managing such a large volume of retail order flow, and what that means in terms of pricing. Others have questioned whether Citadel has such dominance in our financial markets that it poses a systemic risk to the entire U.S. financial system.”
The statistic that Citadel Securities and Virtu Financial “account for more of the overall equity market than the New York Stock Exchange” comes from data provided in a February 5 article at Quartz.
Citadel Securities has an outrageous history of market abuses and yet regulators are allowing it to have ever greater control of U.S. trading. Virtu is no Boy Scout either. This is how Senator Elizabeth Warren described Virtu during a hearing of the Senate Banking Subcommittee on Securities, Insurance and Investment on June 18, 2014:
“For me the term high frequency trading seems wrong. You know this isn’t trading. Traders have good days and bad days. Some days they make good trades and they make lots of money and some days they have bad trades and they lose a lot of money. But high frequency traders have only good days.
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