The hedge fund Citadel LLC and the market maker Citadel Securities say they had nothing to do with the app Robinhood suspending some trading in stocks that have recently experienced a surge in volatility.
The Chicago-based Citadel, founded by billionaire Ken Griffin, had been accused by a swarm of investors on social media of colluding with the online brokers to freeze the purchase of shares in companies that have in recent weeks experienced short squeezes.
“Citadel is not involved in, or responsible for, any retail brokers’ decision to stop trading in any way,” a spokesperson for the hedge fund said in a statement.
“Citadel Securities has not instructed or otherwise caused any brokerage firm to stop, suspend, or limit trading or otherwise refuse to do business,” the statement added. “Citadel Securities remains focused on continuously providing liquidity to our clients across all market conditions.”
Citadel LLC and the market maker Citadel Securities have a firewall between them, the latter does not know the positions of the former. Citadel Execution Services, part of the market-making business saw the most order flow from Robinhood during the third quarter.
Heightened volatility in companies like GameStop Corp. and AMC Entertainment Holdings, both companies with heavy short interest, caused Robinhood on Thursday to prevent customers from initiating new long stock positions in those names. The trading app said at the close of trading that it plans to allow limited buying on Friday.
After the close of trading, Robinhood CEO Vlad Tenev clarified the decision made today was not influenced by any other firm.
GameStop shares had soared 1,642% from Jan. 12 through Wednesday while AMC Entertainment shares had surged 769%. Both companies, and others that have been caught up in short squeezes, closed sharply lower on Thursday.
The short squeeze in GameStop caused Citadel LLC and Point72 Asset Management to, on Monday, rescue the hedge fund Melvin Capital with a combined $2.75 billion investment after it had suffered a nearly 30% loss in the first three weeks of this year, according to The Wall Street Journal, largely due to its losing bet against the videogame retailer.
Melvin Capital is managed by Gabe Plotkin, a former portfolio manager at SAC Capital Management, the previous hedge fund owned by Point72’s Steven Cohen.
Robinhood did not respond to FOX Business’ request for comment.