A Million HFT Algos Suddenly Cry Out In Terror And Are Suddenly Silenced As Citi Announces 1 For 10 Reverse Stock Split

Tyler Durden's picture

While the wacky desperation antics of America's nationalized bank (that would be Citigroup for the cheap seats) enter the surreal zone, after the bank just announced a 1 for 10 reserve stock split (finally returning the stock price to Al Waleed's cost basis, if not entrance market cap) and a 1 cent dividend (which effectively means the Fed can now exit the prop each failing bank game... but won't), the bigger question is what happens to the momentum algos that traditionally traded 500 million shares of Citi stock, providing a supporting base for the market courtesy of massive momentum surges that provided a buying feedback loop mechanism driven out of pure churn volume. Those days are now over, as the volume will plunge pro rata from half a billion to a measly 50 million shares. Furthermore, with algos receiving liquidity rebates on a volume basis, it is conceivable that the biggest piggy bank to the 3 man Ph.D. HFT operations is about to break, as exchanges cut their rebate payouts by 90%. And with the stock market these days being far more a function of volume churn than technicals or, heaven forbid, fundamentals, what happens with the natural HFT support to the market is anyone's guess. One simple assumption: the next time the S&P does a May 6, or a USDJPY flash crash, the liquidity providers will pull out that much faster, leading to a massive freefall without any of the foreplay.

Full release:

Citigroup Inc. today announced a 1-for-10 reverse stock split of
Citigroup common stock. Citi also announced that it intends to reinstate
a quarterly dividend of $0.01 per common share in the second quarter of
2011, following the effective date of the reverse stock split.

“Citi is a fundamentally different company than it was three years ago,”
said Vikram Pandit, Chief Executive Officer of Citigroup. “The reverse
stock split and intention to reinstate a dividend are important steps as
we anticipate returning capital to shareholders starting next year.”

Citi anticipates the reverse stock split will be effective after the
close of trading on May 6, 2011, and that Citi common stock will begin
trading on a split adjusted basis on the New York Stock Exchange (NYSE)
at the opening of trading on May 9, 2011. When the reverse stock split
becomes effective, every ten shares of issued and outstanding Citigroup
common stock will be automatically combined into one issued and
outstanding share of common stock without any change in the par value
per share. This will reduce the number of outstanding shares of
Citigroup common stock from approximately 29 billion to approximately
2.9 billion. Citigroup common stock will continue trading on the NYSE
under the symbol “C” but will trade under a new CUSIP number.

No fractional shares will be issued in connection with the reverse stock
split. Following the completion of the reverse stock split, Citi’s
transfer agent will aggregate all fractional shares that otherwise would
have been issued as a result of the reverse stock split and those shares
will be sold into the market. Stockholders who would otherwise hold a
fractional share of Citigroup common stock will receive a cash payment
from the proceeds of that sale in lieu of such fractional share.
Additional information on the treatment of fractional shares and other
effects of the reverse split can be found in Citi’s definitive proxy
statement filed with the Securities and Exchange Commission on March 12,

Citi is executing its strategy of focusing on its core businesses in
Citicorp to support economic growth including banking, providing loans
to small businesses, making markets and providing capital, while
continuing to wind down Citi Holdings in an economically rational
manner. At the end of 2010, the U.S Treasury sold its remaining shares
of common stock, earning in total a $12 billion profit for taxpayers on
its investment in Citi. 2010 was Citi’s first year of four profitable
quarters since 2006, with $10.6 billion of net income. Citi's capital
strength is among the best in the industry and the bank is focused on
putting its unmatched global network to use for its clients to foster
sustainable and responsible growth.

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Terminus C's picture

In Soviet America algoes fuck you.

PhD's picture

Oh dont worry, you havent been left out. The algo minidick has been ramming your ass for years now. You just havent noticed.

Nobody special's picture

Its much better than becoming penny stock isn't it?  I'm betting that, within 6 months, we'll see these stocks in the $10 range, which would result in de-listing without the reverse split.

living on the edge's picture

Reverse splits are the kiss of death. Goodbye C (with a new cusip number)


PrDtR's picture

BRAVO! my friend..

TradingJoe's picture

I'd love to short Vikram's sick bank @ 45!

asteroids's picture

Why not make it 100:1 or 1000:1 and put it into the same league ask BRK.A? Why not to the same for all the other banks and GM too. Let's see how long the market holds up the balloon then. How stupid do they think we are?

virgilcaine's picture

No Black Swan at least.

Trillax's picture

"Citi is a fundamentally different company than it was three years ago,” said Vikram Pandit, Chief Executive Officer of Citigroup."

The corporate caffeteria changed from canola oil to Extra Virgin olive oil?  The mailroom started using eco-friendly post 30% consumer recycled paper? Sorry, don't see the difference.

sharkbait's picture

That is a good laugh, 'fundamentally different'  what a joke.  Are they making donuts now, selling coffee maybe?

Yen Cross's picture

You are getting a bit cocky.

LowProfile's picture

It's now 50% more bubblicious!

GetZeeGold's picture



That's because it now has electrolytes.




patience...'s picture

No, they are now staying at Holiday Inn.

firstdivision's picture

This will be an amusing stock to watch for the next few days.  Once it is up about 7%, I might look into shorting the crap out of it.  No more bid/ask IOC to float the price.

Yen Cross's picture

Shoot those bitch ass bankers that lack skills my way. I'll beat those BITCHES into the turf. They know it's coming

cossack55's picture

Tyler, my hat is off to the whole crew. None better at turning a phrase. 

Yen Cross's picture

I doubt you could turn your nuts .

WhatCouldGoWrong's picture

May 6th.... Really? What a wonderful way to remember an anniversary.

jesse livermoore's picture

I love the star wars one liner .....headline..........

Blano's picture

Yes, kudos.

"You will never find a more retched hive of scum and villany.  We must be cautious."

MiningJunkie's picture

Sell FRN's - BUY Citi. Sell CASH. Buy Citi. SELL U.S. dollars. Buy Citi. Jettison all debasement items and buy assets - including Citi.

You are witnessing the final end-game collapse of the U.S. dollar and therefore cannot be short.


Id fight Gandhi's picture

Always dump a reverse split. Almost 90% of the time it falls post split.

Maybe momos and algos are weeping at terminals this morning.

prophet's picture

When evaluating trading hedge funds one of the red flags for me is when their successful methods require shorter and shorter time frames in order to keep working.  It says to me that the edge they had is fading.  Translating that to the HFT phenomenon and what the future holds for them is intriguing.

Tense INDIAN's picture

just check marketwatch.com  WHy India is RED when the whole world is green ...heres the reason ...n its simple.



Yen Cross's picture

Ok I'll read it. Took you long enough?

jkruffin's picture

Gap it higher and sell all day, the smart money has been bailing out of the ponzi. 

curbyourrisk's picture

Gotta love an entry point for shorting........


Just be careful, Ben Bernanke will be obtaining the identifying information for every short trade entrant.  He will personally be coming to you home with 4 goons and will explain to you that there is no need for you to be so un-patriotic and that you must be taught a lesson.  Shorting un-american so they say..... 



Fuck that.....   load up with both fists and watch this mutha fucker burn TWICE.

hamurobby's picture

Just waiting for the s+p to bump the 50 day.

Wakanda's picture

"...leading to a massive freefall without any of the foreplay."

Making popcorn for the big one.  Too bad about the foreplay though.

Bruce Krasting's picture

You can't get margin on <$5 stocks. Most big funds don't buy < $5 stocks.

Problem solved.....

overmedicatedundersexed's picture

avoiding delisting is child's play these days of the big moon..not a bullish signal or is it in Ben's mirror..Mirror mirror on the wall who's the greatest ponzi man of all??

iinthesky's picture

Thats like dressing up a busted fat ugly french whore to look 'like a virgin'

Rogerwilco's picture

Drives out the riff-raff and makes the counting that much easier when Obama nationalizes their ass later in the year.

Seasmoke's picture

way back in the old days (1999) a reverse split, was a sure sign of the kiss of death......probably not the same in 2011

smlbizman's picture

i want all fed, state, gm type unions to have their future pensions invested in the following newly not yet created fund, please feel free to help me add the missing companies.

gm, aig, the top 5 big banks, the dollar, treasuries,  u.s. bonds, fannie, freddie, sallie????  

apberusdisvet's picture

"a massive freefall without the foreplay"


All long as we have an orgasm, everything is fine; move on sheeple.  Your wealth will just be placed in more appropriate hands.

defn8Dog's picture

Cramer to sheeple "told you it was going higher."

NumberNone's picture

Tiffany just reported good numbers.  Everything will be fine. 

rickA's picture

tyler. just come out already. admit you coded the algos and now feel guilty that they've gotten so out of hand.

hettygreen's picture

Didn't the VIX reverse split before last fall's equity launch? Just about every 2X inverse ETF I follow has split at least once over the last couple of years and the price has always subsequently declined. Seems to me the best possible course of action when this happens is to get out asap or risk substantial losses. Can anyone provide an example of a reverse stock split that has not been the kiss of death?

iinthesky's picture

I refuse to watch CNBC so what are those idiots saying about all this?