Say it with me. Self regulation does not work. Never has. Never will. And no one is buying that this "Chinese Wall" isn't breached every moment of every day. It just happens over the proverbial...
Chinese wall: Over the years, large financial institutions have used Chinese wall policies as a means to self-regulate
Say it with me. Self regulation does not work. Never has. Never will. And no one is buying that this "Chinese Wall" isn't breached every moment of every day. It just happens over the proverbial watercooler instead of via an interoffice (pick your era) memo/email/messaging. With how easy it is to create an LLC there is zero reason for Chinese Walls to even be fathomable, the separate LLC can and should be in an entirely different building with entirely different staff that has zero connection to the other.
The entire basis of the argument is "they're two separate LLCs that pinky swore not to talk to one another as they sleep in the same bed."
The two Citadels don't actually need a Chinese wall anymore since they're two separate companies since around 2017. But it is quite strict while it existed; I had a friend who worked at Citadel as...
The two Citadels don't actually need a Chinese wall anymore since they're two separate companies since around 2017. But it is quite strict while it existed; I had a friend who worked at Citadel as an engineer for a while (left about a year ago) and not only are official communications monitored, but they're in completely separate offices, and you have to file a report anytime you meet in person with someone from the other company.
But, of course, does that mean it's impossible for executives to talk over dinner or something? Of course not. But it makes it the idea more and more far fetched every moment. Like I said
Additionally I'm sure Citadel #1 and Citadel #2 have friends in leadership. Maybe Citadel #1 called up Citadel #2 to pressure Robinhood. But I would note that no one actually knows if Citadel #1 has short positions on GME to begin with. And no, "my dad works at Citadel and he told me that Citadel shorted GME" on Twitter is not a source.
The hypothetical is technically possible, but given that this is an area of regulatory scrutiny (collusion between market makers and players) it would imply that Citadel the Hedge Fund's fate is so heavily tied into GME shorts that they not only are slated to lose more than Citadel Securities would earn in the GME volatility, but that they would risk the complete collapse of both institutions for illegal activity.
Gamestop is not exactly a hot or famous commodity before the last few weeks. I think people are greatly overestimating the exposure hedge funds have in any shape or fashion in this small cap company. A few specific hedge funds may be exposed, but this isn't 2008 - not everyone has a bloody Gamestop position. It's Gamestop.
Like, it's a much more believable conspiracy, for example, that Melvin Capital's Plotkin went to dinner with Robinhood's CEO and threw him a bucket of benjamins. Finance can be incestuous
But really, that's irrelevant. I am mostly disturbed by the degree to which obvious and outright falsehood has spread.
Find the differences in these two statements. And even if your friend is right, what a rank and file engineer has to do and what bosses have to do are two very different things. Your friend had to...
"my dad works at Citadel [. . .] "
I had a friend who worked at Citadel [. . .]
Find the differences in these two statements.
And even if your friend is right, what a rank and file engineer has to do and what bosses have to do are two very different things. Your friend had to do it because he wanted to keep his job. People that are moving billions don't do it because they don't want even a whiff of proof that it occurs.
The hypothetical is technically possible...
Not just technically possible, suspiciously coincidental.
not everyone has a bloody Gamestop position. It's Gamestop
No one is saying everyone has a position, just that the proof is already there that a lot of people do and those same people have fingers in pies they shouldn't. "It's Gamestop" is a hand waving attempt to dismiss something because you find it insignificant.
But really, that's irrelevant. I am mostly disturbed by the degree to which obvious and outright falsehood has spread.
Which is funny because your argument boils down to "they wouldn't/couldn't do that because it's illegal" and yet the legality of something never seems stop criminals from doing it. And we all know no large organization has ever committed securities fraud to save billions knowing it's a slap on the wrist if they're caught let alone prosecuted.
There is zero actual evidence that funds have closed their short positions, except Citron, and the volumes back it up.
The effectiveness of the Chinese wall is a moot point, so I added a personal anecdote. Moot because they are separate firms. But what is actually coincidental about it? The coincidences are...
The effectiveness of the Chinese wall is a moot point, so I added a personal anecdote. Moot because they are separate firms.
Not just technically possible, suspiciously coincidental.
But what is actually coincidental about it? The coincidences are
Citadel the Hedge Fund Exists
Citadel Securities purchases order flow from Robinhood.
Which is not a lot of coincidences.
Fundamentally, the burden of evidence lies on the claim being made. There is no evidence for this claim, and it doesn't help the claims currently being made are being supported by falsities.
My argument in the blog post has nothing to do with whether or not Citadel actually colluded - in fact, I offered a more believable scenario than one being peddled on twitter right now. It is rather that literal lies are being fed en mass. The twitter post in there is almost entirely false on a factual basis. Like, point by point false. In there I purposefully avoided the question of whether or not actual collusion occurred between Citadel or another HF and Robinhood to avoid this pointless exercise.
I think the modal outcome is that absolutely nothing happened, but I will refrain from engaging further on that topic since it is fruitless speculation.
How are statements like "Robinhood is owned by Citadel", "Melvin Capital is owned by Citadel", "Robinhood primarily serves Hedge Funds", "Robinhood sells data to Hedge Funds" not factually false?
If the CEO of one has the majority stake in the other, I would think that doesn't hold. "It's ok guys, I split my LLC in two and even though I profit from and have major influence on both, there's...
Moot because they are separate firms.
If the CEO of one has the majority stake in the other, I would think that doesn't hold.
"It's ok guys, I split my LLC in two and even though I profit from and have major influence on both, there's absolutely no possibility of a conflict of interest."
Especially when the securities company is generally less profitable than the hedge fund.
I say mostly to question that statement. Not necessarily if it is relevant here.
Looks like the truth is out by now. Robinhood had serious liquidity issues because they didn't have the capital margins they're required for clearing houses. Which makes sense, since there are...
Looks like the truth is out by now. Robinhood had serious liquidity issues because they didn't have the capital margins they're required for clearing houses.
There are rules and contracts between The Depository Trust & Clearing Corporation and its members, including Robinhood [2]. Those contracts ensure that when you buy shares through your broker from a Robinhood customer, if Robinhood falls down two days later, there is collateral sufficient to make you whole. Those collateral requirements change in reference to, amongst other things, the volatility of the security. (If a broker falls down, the clearinghouse liquidates their collateral and makes their counterparty whole. More volatility means more chance the collateral will be insufficient.)
In this case, collateral requirements on GME went up. Because of its volatility. So while before Robinhood had to pony up collateral for a few shares of GME for every hundred it traded, it now had to, at close of business, pony up one hundred shares' worth of collateral for every hundred it traded. That creates a cash crunch. One that exacerbates itself with every additional trade in the security. If Robinhood fails to satisfy those collateral calls, they go out of business overnight. Into receivership. Done.
Most brokers have policies for these situations. Higher brokerage fees for securities on a schedule. Not making shares and cash from trades available until the trade settles, sort of like what banks do for large cheques. But I don't know if Robinhood is able to do that quickly. So instead they pulled the plug.
It might be worth mentioning the obvious explanation for why Robinhood did halt buys for meme stocks: their customers stand to get rinsed on those purchases, and that makes Robinhood look bad....
It might be worth mentioning the obvious explanation for why Robinhood did halt buys for meme stocks: their customers stand to get rinsed on those purchases, and that makes Robinhood look bad. Since this whole fiasco is now international news, it stands to make them look bad on the front pages of major newspapers worldwide. Robinhood is no stranger to bad press, but it's not at all difficult to imagine them seeing that sort of potential media exposure, blinking, and making extremely poor decisions to try to limit the losses their customers sustain.
That could be a part, but I'm inclined to believe Robinhood's statement on the matter https://twitter.com/vladtenev/status/1354900961542565889 Or their blogpost which said the same thing Which is...
That could be a part, but I'm inclined to believe Robinhood's statement on the matter
As a brokerage firm, Robinhood has many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.
Say it with me. Self regulation does not work. Never has. Never will. And no one is buying that this "Chinese Wall" isn't breached every moment of every day. It just happens over the proverbial watercooler instead of via an interoffice (pick your era) memo/email/messaging. With how easy it is to create an LLC there is zero reason for Chinese Walls to even be fathomable, the separate LLC can and should be in an entirely different building with entirely different staff that has zero connection to the other.
The entire basis of the argument is "they're two separate LLCs that pinky swore not to talk to one another as they sleep in the same bed."
The two Citadels don't actually need a Chinese wall anymore since they're two separate companies since around 2017. But it is quite strict while it existed; I had a friend who worked at Citadel as an engineer for a while (left about a year ago) and not only are official communications monitored, but they're in completely separate offices, and you have to file a report anytime you meet in person with someone from the other company.
But, of course, does that mean it's impossible for executives to talk over dinner or something? Of course not. But it makes it the idea more and more far fetched every moment. Like I said
The hypothetical is technically possible, but given that this is an area of regulatory scrutiny (collusion between market makers and players) it would imply that Citadel the Hedge Fund's fate is so heavily tied into GME shorts that they not only are slated to lose more than Citadel Securities would earn in the GME volatility, but that they would risk the complete collapse of both institutions for illegal activity.
Gamestop is not exactly a hot or famous commodity before the last few weeks. I think people are greatly overestimating the exposure hedge funds have in any shape or fashion in this small cap company. A few specific hedge funds may be exposed, but this isn't 2008 - not everyone has a bloody Gamestop position. It's Gamestop.
Like, it's a much more believable conspiracy, for example, that Melvin Capital's Plotkin went to dinner with Robinhood's CEO and threw him a bucket of benjamins. Finance can be incestuous
But really, that's irrelevant. I am mostly disturbed by the degree to which obvious and outright falsehood has spread.
Find the differences in these two statements.
And even if your friend is right, what a rank and file engineer has to do and what bosses have to do are two very different things. Your friend had to do it because he wanted to keep his job. People that are moving billions don't do it because they don't want even a whiff of proof that it occurs.
Not just technically possible, suspiciously coincidental.
No one is saying everyone has a position, just that the proof is already there that a lot of people do and those same people have fingers in pies they shouldn't. "It's Gamestop" is a hand waving attempt to dismiss something because you find it insignificant.
Which is funny because your argument boils down to "they wouldn't/couldn't do that because it's illegal" and yet the legality of something never seems stop criminals from doing it. And we all know no large organization has ever committed securities fraud to save billions knowing it's a slap on the wrist if they're caught let alone prosecuted.
There is zero actual evidence that funds have closed their short positions, except Citron, and the volumes back it up.
The effectiveness of the Chinese wall is a moot point, so I added a personal anecdote. Moot because they are separate firms.
But what is actually coincidental about it? The coincidences are
Citadel the Hedge Fund Exists
Citadel Securities purchases order flow from Robinhood.
Which is not a lot of coincidences.
Fundamentally, the burden of evidence lies on the claim being made. There is no evidence for this claim, and it doesn't help the claims currently being made are being supported by falsities.
My argument in the blog post has nothing to do with whether or not Citadel actually colluded - in fact, I offered a more believable scenario than one being peddled on twitter right now. It is rather that literal lies are being fed en mass. The twitter post in there is almost entirely false on a factual basis. Like, point by point false. In there I purposefully avoided the question of whether or not actual collusion occurred between Citadel or another HF and Robinhood to avoid this pointless exercise.
I think the modal outcome is that absolutely nothing happened, but I will refrain from engaging further on that topic since it is fruitless speculation.
How are statements like "Robinhood is owned by Citadel", "Melvin Capital is owned by Citadel", "Robinhood primarily serves Hedge Funds", "Robinhood sells data to Hedge Funds" not factually false?
If the CEO of one has the majority stake in the other, I would think that doesn't hold.
"It's ok guys, I split my LLC in two and even though I profit from and have major influence on both, there's absolutely no possibility of a conflict of interest."
Especially when the securities company is generally less profitable than the hedge fund.
I say mostly to question that statement. Not necessarily if it is relevant here.
Looks like the truth is out by now. Robinhood had serious liquidity issues because they didn't have the capital margins they're required for clearing houses.
Which makes sense, since there are other clearing houses having issues https://twitter.com/public/status/1354826467184578571?s=21
This comment on hn was interesting
It might be worth mentioning the obvious explanation for why Robinhood did halt buys for meme stocks: their customers stand to get rinsed on those purchases, and that makes Robinhood look bad. Since this whole fiasco is now international news, it stands to make them look bad on the front pages of major newspapers worldwide. Robinhood is no stranger to bad press, but it's not at all difficult to imagine them seeing that sort of potential media exposure, blinking, and making extremely poor decisions to try to limit the losses their customers sustain.
That could be a part, but I'm inclined to believe Robinhood's statement on the matter
https://twitter.com/vladtenev/status/1354900961542565889
Or their blogpost which said the same thing
Which is corroborated by Robinhood is said to draw on bank credit lines amid tumult from Bloomberg.