Update, April 1 2022:

Shortly after publishing this post on March 29, I received an e-mail from an analyst at TrailRunner International. The firm handles “media, law, finance, and regulatory affairs,” according to its homepage.

The analyst informed me that the article from New York Magazine on which I’m commenting in this post had had a correction after I published my post. New York Magazine had incorrectly stated that the NYSE was investigating Citadel itself.

In fact, the NYSE investigation is of the price activity in Shopify shares, rather than of Citadel itself.

Since the analyst’s request seemed well-founded, I updated the post below to reflect this change to the underlying article.

I asked the analyst if his firm had been retained by Citadel and, if so, if I could speak to someone there.

He neither confirmed nor denied that his firm had been retained by Citadel, but said he’d pass the request on to them.

I can only assume the firm is working for Citadel.

Whatever any of us may think of Citadel’s business practices, I try to be fair on this blog. Hence the update to this post! 🙂

The New York Stock Exchange (NYSE) is investigating a sudden spike and crash in Shopify Inc. shares. The unusual price action may be due to trading by Citadel Securities.

From a new report by New York Magazine:

On March 18, a weird thing happened at the New York Stock Exchange. It was near the end of trading for the day, one minute before the closing bell had rung, when the price of Shopify’s stock went haywire, shooting up about $100 per share to $780 before immediately crashing down again in post-market trading. There was no sudden revelation about the business that would have caused it to jump.

Citadel seems to be behind this unusual activity. The firm had bought large blocks of the shares for a client that afternoon, resulting in an imbalance between buy and sell orders.

Next, rather than trying to bring more sellers into the market to balance it, Citadel appears to have taken advantage of the situation:

Because the amount of buy orders was so out of whack, Citadel was able to sell into the market — a move that’s allowed by the exchange. Other Wall Street players have said that Citadel could have done more to bring more sellers into the market. Either way, the price of the shares rocketed up about 13 percent in the final minute of trading, before immediately tumbling down in after-hours trading.

What exactly happened is murky, but early reports suggest Citadel dumped shares to other market participants right before the close. These bag holders quickly took a substantial loss.

There is no indication that what Citadel did was illegal or even necessarily against NYSE rules. But the function of a market maker like Citadel Securities is to ensure a liquid, functional market, not engineer giant swings in a stock for its own benefit.

I find it telling that Citadel is finding itself under scrutiny from many directions at once.

Its Surveyor Capital unit is caught up in a federal probe of short sellers. Citadel Securities faced a lawsuit after its partner, Robinhood Markets Inc, halted trades in meme stocks. (That suit was later dismissed.)

Now the NYSE is probing Citadel’s trades. If I were Ken Griffin, I’d be concerned that my company is getting too close to the regulatory and legal line.

What do you think the NYSE will find in its investigation? Leave a comment at the bottom and let me know!

More on markets:

Citadel Under Federal Investigation

Mass Firings at Citadel Right Before Federal Probe

Short Squeezes Could Get Much Easier Under This New Rule

Photo: Citadel LLC CEO Kenneth Griffin

If you found this post interesting, please share it on Twitter/Reddit/etc. This helps more people find the blog! 

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. 

Misfits Market

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $10 on your first order.