Unusual Whales

Citadel Securities Gets $9.66M Fine in South Korea for Local Stock Market Disturbance

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Per Reuters

The Financial Services Commission (FSC) of South Korea is slapping a $9.66 million fine on Citadel Securities, a US-based capital markets firm, for reportedly "distorting stock prices with artificial factors."

An average of 1,422 stocks per day were affected from Oct 2017 until May 2018. Despite the regulator not releasing the brokerage's identity, Citadel Securities confirmed that it had been waiting for a decision.

Citadel Securities: "We strongly believe our trading complied with both Korean laws and global norms. We disagree with the FSC’s decision relating to our trading activity more than five years ago and will be seeking to appeal the decision."

The South Korean financial regulators note that Citadel Securities caused a disturbance with its high-frequency algorithmic trading in the local stock market of the country. An example of the disruptions was with orders that had the "immediate or cancel" condition and filled bid price gaps.

On top of this, The Commission noted that no algorithm source codes were provided during the consultation process and that the firm had continued this activity for over $406 billion worth of trades. This was the first time the Commission imposed fines for high-frequency trading.

Per a familiar source, the capital markets firm noted that it was not invited to participate in a number of hearings. It was also highlighted that "supposed expert evidence" wasn't shared to them and that they had no chance to give an explanation or response to the claims.

Citadel Securities is not the only company that has recently received a fine from South Korea. Tesla got a fine from the Korea Fair Trade Commission (KFTC) worth $2.2 million for the company's failure to disclose the low-temperature performance of its electric vehicles, including its driving ranges, cost-effectiveness, and performance.

Despite the fine, Citadel's hedge fund became the top-earning hedge fund in 2022 after it gained $16 billion that year.

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Reuters