Citadel Blasts Lewis' Flash Boys; Says "Small Investors Have Never Been So Fortunate"

Tyler Durden's picture

Citadel's head of Execution Services (cough HFT cough) Jamil Nazarali, proclaimed Monday that small investors have never been so fortunate and said, with regard to Michael Lewis' now infamous book Flash Boys, "The most important thing that the market can do is stop... pointing fingers at everyone else." Citadel, who allegedly provides the NY Fed's VIX trading capabilities, are among the very largest high-frequency traders in the market (and the most levered), so one would surely expect that Citadel would like us all to stop pointing fingers at them. As Bloomberg reports, Nazarali said yesterday during a panel discussion at the Milken Institute Global Conference in Beverly Hills, California, "things are much better today than they were 10 to 15 years ago."

 

As a gentle reminder, Citadel is the most levered fund (as an HFT hiding in a hedge fund)...

 

 

So it is hardly surprising that the head of execution services - another name for High-Frequency-Trading - would come out swinging against Flash Boys...

As Bloomberg reports, Michael Lewis produced a top-selling book by arguing that the U.S. stock market is rigged. To one of hedge-fund operator Citadel LLC’s top executives, small investors have never been more fortunate.

“It’s one of the few markets in the world where the little guy gets a better deal than the big guy,” Jamil Nazarali, the head of Citadel Execution Services, said yesterday during a panel discussion at the Milken Institute Global Conference in Beverly Hills, California. “Things are much better today than they were 10 to 15 years ago.”

Flash Boys specifically called out the likes of Citadel for the practice of paying for order flow...

Citadel’s role in that discussion stems from Nazarali’s unit, which pays brokerages including TD Ameritrade Holding Corp. for the right to execute orders placed by their customers, who tend to be individuals.

 

Lewis critiqued that practice, known as payment for order flow. Citadel’s rivals in that business include Citigroup Inc., UBS AG and KCG Holdings Inc. All are bound by rules meant to ensure they get the best price possible for investors.

 

Nazarali said yesterday that small investors often get better prices for their trades than the biggest firms.

Which is odd, as LiquidNet notes...

“If you are going to buy in bulk, you should get a better price than someone buying retail,” Liquidnet Chief Executive Officer Merrin said during a panel discussion with Nazarali. Giving the smallest investors a better deal than the biggest investors is “screwed up,” he said.

Merrin isn’t alone in arguing that large investors aren’t adequately served by the market’s current structure.

But Nazarali summed it up perfectly, when asked how to improve the perception among investors that the equity market is broken...

...more cohesion is needed...

 

“The most important thing that the market can do is stop the food fight where everyone is pointing fingers at everyone."

In other words... we need to stick together... stop pointing fingers at us because you know as well as us that if you bring us down, it won't end well.

We remain of the opinion that while HFT has gone off the headlines for the moment - and market rigging has been forgotten now we are rising again - that if and when the next big drop comes, there will be only one scapegoat...