Kenneth Griffin, the founder of Citadel Securities, said it would be “very good” if payment for order flow were prohibited, as the controversial practice is increasingly monitored by securities regulators.
“Paying for the order flow is a cost to me,” Griffin said, speaking to the Economic Club of Chicago on Monday. “So if you tell me that by regulatory decree one of my main expense items disappears, I agree. “
Order Flow Payment is the controversial practice of brokers of selling trades made on their platform to market makers such as Citadel Securities. It’s lucrative for retail brokers like Robinhood and Charles Schwab, who use the practice to provide commission-free stocks and options to their clients.
In the year to June 2021, Citadel Securities paid brokers nearly $ 1.5 billion for their order flow, according to regulatory documents compiled by Bloomberg Intelligence, the largest number of market makers .
Order flow payment was put to the test earlier this year when chaotic investor trading organized by Reddit’s r / WallStreetBets page made many aware of the role Citadel Securities plays in managing volumes. of retail brokerage transactions.
Citadel Securities is America’s largest market maker, a company that buys and sells securities and provides liquidity. It manages about a quarter of all stocks traded in the United States, according to the Chicago-based company.
Staff at the U.S. Securities and Exchange Commission are working on new recommendations on order flow payment. Gary Gensler, chairman of the SEC, said the practice “can present a number of conflicts of interest,” and sought to determine whether selling retail offers value to retail customers.
Speaking on the SEC’s interest, Griffin said if the payment for the order flow “wears off tomorrow,” he “totally agrees with that.”
For the latest fintech news and opinions from FT’s correspondent network around the world, sign up for our weekly newsletter #fintechFT
“Have you eliminated one of my main cost lines?” I’m going to be a winner in this scenario, ”he said.
Griffin has been a strong advocate of payment for order flow, saying the role of practice makes commerce cheaper for customers and is “good for everyone.”
He noted that while the retail boom “hasn’t been good,” he warned brokers would reintroduce commissions to clients if payment for order flows were banned, which “would be a huge loss.” .
“Hopefully in Washington we maintain the status quo that brokerage firms have a duty to ensure the best possible execution for their clients,” Griffin said in his speech. “It’s the basis on which we compete, and it’s the basis on which we win. ”
Separately, Griffin said Citadel Securities will not trade cryptocurrencies due to uncertainty over how it will be regulated. He called the crypto “a jihadist call that ‘we don’t believe in the dollar'”.