Citadel Securities is urging the Securities and Exchange Commission’s new leadership to examine a list of what it argues are emerging and mounting risks, including opaque trading in so-called private rooms and the push by US stock markets to operate around the clock.
Billionaire Ken Griffin’s market-making firm sent more than 30 recommendations, spotlighting concerns in equities, credit, treasuries, options and digital assets. Subjects included private rooms — a twist on dark pools, in which only certain parties are allowed to transact.
“Now is the right time to comprehensively review the current regulatory framework and take decisive action to remove unnecessary costs and increase efficiency to unleash a new wave of innovation,” the firm wrote in a document sent to the commission and reviewed by Bloomberg.
Though Citadel Securities is often vocal about how it thinks the agency should handle market structure — an issue key to the firm’s own operations and profits — its input may reach more a receptive audience as President Donald Trump’s administration installs new leaders at the SEC. A representative for the watchdog declined to comment.
The latest round of recommendations comes just days after Paul Atkins was sworn in as SEC chairman. Atkins is expected to scale back regulation, ease disclosure requirements and adopt a friendlier stance for certain companies that once sparred with his predecessor, Gary Gensler.
Among emerging topics, Citadel Securities asked the agency to address the proliferation of private rooms on alternative trading systems, raising questions about transparency and the way trades are reported from the off-exchange venues. Operators “appear to be only providing minimal disclosures regarding private rooms on their platforms,” the firm wrote.
Citadel Securities also called out the transition to 24-hour trading in the US, with three of the largest stock venues looking for an SEC nod to operate overnight. “The regulatory framework for order handling requirements, execution quality disclosures, and volatility controls must be clear, fit for purpose, and consistent across venues,” it said.
Under Gensler’s leadership, Citadel Securities publicly pushed back on some SEC moves to rework stock trading. Last year, the commission approved a rule that would allow thousands of stocks and ETFs traded on exchanges to be quoted in half-penny increments. That rule should be amended and tested in a two-year pilot program before it’s fully implemented, Citadel Securities said in its recent recommendations.
The market maker also made a dozen suggestions for policy changes across the options market, which it said has received less regulatory attention. “As the equity options market continues to increase in significance, it is important to ensure that market structure components that could serve as a single point of failure are well regulated and resilient,” it wrote.
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