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Order flow in dark pools does impact the price of a security. The market maker will eventually need to trade out of that position. If there is aggregate buying

Order flow in dark pools does impact the price of a security. The market maker will eventually need to trade out of that position. If there is aggregate buying pressure in the dark pool, they will adjust their quotes in both dark and lit markets.

taway789aaa6 2y ago
> The market maker will eventually need to trade out of that position This is why Citadel has $60+ billion dollars of "securities sold not yet purchased" on their financial statements. They have sold $60+ BILLION of shares to investors and not yet bought the underlying securities. So when exactly will that $60 billion of buy pressure hit the market?
- shred45 2y ago
  I don't think this really tells you anything, and it also will impact the quotes they are making, even if they are holding the position for now.
- gruez 2y ago
  >This is why Citadel has $60+ billion dollars of "securities sold not yet purchased" on their financial statements. 1. source? 2. supposing this is true, what's their daily turnover? "60+ billion" sounds like a lot, but if that's their daily turnover that shouldn't be anything out of the ordinary.
  - Lionga 2y ago
    1. Just look at their financial statements they , nobody is allowed this naked shorting but Cidatel is because they are a market manipu ahhh sorry maker. Not that others won't naked short also, it is just they do not do it openly.
    - gruez 2y ago
      >nobody is allowed this naked shorting but Cidatel is because they are a market manipu ahhh sorry maker. That's... working as intended? > market makers provide a required amount of liquidity to the security's market, and take the other side of trades when there are short-term buy-and-sell-side imbalances in customer orders. In return, the specialist is granted various informational and trade execution advantages. You can argue such a system is inegalitarian or whatever, but if you want a reliable provider of liquidity that won't instantly vanish when there's market turmoil (ie. when you need it the most), there has to be some mechanism to compensate market makers.
      - slt2021 2y ago
        Citadel is basically counterfeiting shares, just like the Fed is printing dollars. its a scam and is a reason how Citadel makes $30,000,000,000 profit per year
        gruez 2y ago
        >its a scam and is a reason how Citadel makes $30,000,000,000 profit per year Where are you getting "$30,000,000,000" (billion) in profit? Wikipedia says they only made $6.3 billion in revenue in 2023. Moreover, they were in existence for 22 years. Even if they only started "counterfeiting shares" in 2021, $30B in profit per year (so $90B in the past 3 years) seems absurd for only $60B worth of "counterfeiting shares" on their balance sheets.
        slt2021 2y ago
        Citadel gross trading profit totalled $28bn last year, https://www.hedgeweek.com/citadel-makes-record-16bn-profit/#:~:text=Citadel%20gross%20trading%20profit%20totalled,in%20expenses%20and%20performance%20fees https://www.hedgeweek.com/citadel-makes-record-16bn-profit/#.... 60B is a balance at a specific date 12/31/2022, they trim the balance by the EOY and harvest losses. the average balance is much bigger and fluctuates heavily given market demand. UPD: I stand corrected, the market making arm only made meager $5,000,000,000 for the 6 months, so more like 10,000,000,000/year, not 28 https://www.nasdaq.com/articles/citadel-and-jane-street-set-record-revenue-competition-banks-heats https://www.nasdaq.com/articles/citadel-and-jane-street-set-...
- jkulubya 2y ago
  Leaving aside the veracity of that figure, if they've sold $60B of shares they don't own then they must've sold shares they borrowed in some way, and that shows up in the demand/supply. Someone (or someones) in the market would know.
  - Lionga 2y ago
    As a market maker Citadel is allowed to do naked shorting.
    - jkulubya 2y ago
      A naked short on their own account would be illegal. A time-bound naked short to fulfill their role as market maker would be acceptable. But even then, all trades are either eventually settled at some time t, or fail to settle, e.g. if the seller is not good for the shares. Any of these 2 events happening is reported outside of a single broker-dealer, i.e. public info. And to settle a trade, you will need the actual shares, that you've either bought or borrowed. All this info, settlements, failures, stock buys & loans is visible to other parties in the market. If your point is that the Citadel is breaking the law, and not reporting what they should, when they should, then that's a problem. But there would be so many other parties discovering it way before their annual financials are published.
      - slt2021 2y ago
        they kick the can down the road every day, until the market price returns to what they desire and only then they send order to a lit market. also heavy usage of synthetic shares and derivatives to hide naked shorts
        jkulubya 2y ago
        Sure, but the problem isn’t that Citadel is expecting that the price will drop. The claim was that Citadel can take a short position without other parties in the market knowing, and finding out only from their annual financials. That’s not true, because, amongst other reasons, everything you’ve listed (synthetic shares/derivatives/kicking the can down the road) can be seen by others in the market. (Naked) Short all you want, there’s nothing wrong morally with betting in that direction. But it will be picked up.
- toast0 2y ago
  > They have sold $60+ BILLION of shares to investors and not yet bought the underlying securities. > So when exactly will that $60 billion of buy pressure hit the market? Citadel needs to deliver the stock they sold on T+1 as of May 28, 2024. There's some allowance for failure to deliver, but the data is out there, if Citadel is routinely failing to deliver, you should be complaining about that, not about their financial statements. Meanwhile, if Citadel wants to pay me fractional pennies more per share than a public exchange, and also my brokerage fractional pennies for the privilege, who am I to say no? Especially when the public exchange may charge me a fee to trade.
  - slt2021 2y ago
    they can keep failure to deliver forever until the market moves in their desired position to actually send orders to lit market. they use derivatives and heavily recycle buy/sell shares to keep kicking the FTD can down the road for as long as the market returns to their desired position.
    - wbl 2y ago
      No they can't. They can keep a short position but that isn't failure to deliver.
      - slt2021 2y ago
        the T+1 timer can be easily reset every day, until the market price reverts back to the Citadel's modeled price at which it is profitable/least losses for them to send order to lit market
        toast0 2y ago
        What are the mechanics of that? Let's say I buy a share of F on Monday, my brokerage routes it to Citadel, because PFOF. On Tuesday, I expect to get a share of F delivered at close of business, because T + 1. If Citadel doesn't deliver on Tuesday, what happens? Are you suggesting they would continue to not deliver the share I purchased for several days, by saying oh yeah, we'll get toast0 his shares tomorrow? That would be pretty upsetting, and I imagine I'd call my brokerage and ask them why they're dealing with Citadel if they never deliver shares on time.
- snapcaster 2y ago
  If you actually don't understand why that citadel statement said that you should read up on how market makers work. Any given snapshot in time for them would have enormous quantities of securities on both sides because they have to hedge all of their activities to remain neutral to any price movements. >So when exactly will that $60 billion of buy pressure hit the market? it probably did shortly after the statement, coupled with a likely similarly sized "sell pressure". They're constantly buying and selling things that's how the business model works

taway789aaa6 2y ago

> The market maker will eventually need to trade out of that position This is why Citadel has $60+ billion dollars of "securities sold not yet purchased" on their financial statements. They have sold $60+ BILLION of shares to investors and not yet bought the underlying securities. So when exactly will that $60 billion of buy pressure hit the market?

shred45 2y ago
I don't think this really tells you anything, and it also will impact the quotes they are making, even if they are holding the position for now.
gruez 2y ago
>This is why Citadel has $60+ billion dollars of "securities sold not yet purchased" on their financial statements. 1. source? 2. supposing this is true, what's their daily turnover? "60+ billion" sounds like a lot, but if that's their daily turnover that shouldn't be anything out of the ordinary.
- Lionga 2y ago
  1. Just look at their financial statements they , nobody is allowed this naked shorting but Cidatel is because they are a market manipu ahhh sorry maker. Not that others won't naked short also, it is just they do not do it openly.
  - gruez 2y ago
    >nobody is allowed this naked shorting but Cidatel is because they are a market manipu ahhh sorry maker. That's... working as intended? > market makers provide a required amount of liquidity to the security's market, and take the other side of trades when there are short-term buy-and-sell-side imbalances in customer orders. In return, the specialist is granted various informational and trade execution advantages. You can argue such a system is inegalitarian or whatever, but if you want a reliable provider of liquidity that won't instantly vanish when there's market turmoil (ie. when you need it the most), there has to be some mechanism to compensate market makers.
    - slt2021 2y ago
      Citadel is basically counterfeiting shares, just like the Fed is printing dollars. its a scam and is a reason how Citadel makes $30,000,000,000 profit per year
      - gruez 2y ago
        >its a scam and is a reason how Citadel makes $30,000,000,000 profit per year Where are you getting "$30,000,000,000" (billion) in profit? Wikipedia says they only made $6.3 billion in revenue in 2023. Moreover, they were in existence for 22 years. Even if they only started "counterfeiting shares" in 2021, $30B in profit per year (so $90B in the past 3 years) seems absurd for only $60B worth of "counterfeiting shares" on their balance sheets.
        slt2021 2y ago
        Citadel gross trading profit totalled $28bn last year, https://www.hedgeweek.com/citadel-makes-record-16bn-profit/#:~:text=Citadel%20gross%20trading%20profit%20totalled,in%20expenses%20and%20performance%20fees https://www.hedgeweek.com/citadel-makes-record-16bn-profit/#.... 60B is a balance at a specific date 12/31/2022, they trim the balance by the EOY and harvest losses. the average balance is much bigger and fluctuates heavily given market demand. UPD: I stand corrected, the market making arm only made meager $5,000,000,000 for the 6 months, so more like 10,000,000,000/year, not 28 https://www.nasdaq.com/articles/citadel-and-jane-street-set-record-revenue-competition-banks-heats https://www.nasdaq.com/articles/citadel-and-jane-street-set-...
jkulubya 2y ago
Leaving aside the veracity of that figure, if they've sold $60B of shares they don't own then they must've sold shares they borrowed in some way, and that shows up in the demand/supply. Someone (or someones) in the market would know.
- Lionga 2y ago
  As a market maker Citadel is allowed to do naked shorting.
  - jkulubya 2y ago
    A naked short on their own account would be illegal. A time-bound naked short to fulfill their role as market maker would be acceptable. But even then, all trades are either eventually settled at some time t, or fail to settle, e.g. if the seller is not good for the shares. Any of these 2 events happening is reported outside of a single broker-dealer, i.e. public info. And to settle a trade, you will need the actual shares, that you've either bought or borrowed. All this info, settlements, failures, stock buys & loans is visible to other parties in the market. If your point is that the Citadel is breaking the law, and not reporting what they should, when they should, then that's a problem. But there would be so many other parties discovering it way before their annual financials are published.
    - slt2021 2y ago
      they kick the can down the road every day, until the market price returns to what they desire and only then they send order to a lit market. also heavy usage of synthetic shares and derivatives to hide naked shorts
      - jkulubya 2y ago
        Sure, but the problem isn’t that Citadel is expecting that the price will drop. The claim was that Citadel can take a short position without other parties in the market knowing, and finding out only from their annual financials. That’s not true, because, amongst other reasons, everything you’ve listed (synthetic shares/derivatives/kicking the can down the road) can be seen by others in the market. (Naked) Short all you want, there’s nothing wrong morally with betting in that direction. But it will be picked up.
toast0 2y ago
> They have sold $60+ BILLION of shares to investors and not yet bought the underlying securities. > So when exactly will that $60 billion of buy pressure hit the market? Citadel needs to deliver the stock they sold on T+1 as of May 28, 2024. There's some allowance for failure to deliver, but the data is out there, if Citadel is routinely failing to deliver, you should be complaining about that, not about their financial statements. Meanwhile, if Citadel wants to pay me fractional pennies more per share than a public exchange, and also my brokerage fractional pennies for the privilege, who am I to say no? Especially when the public exchange may charge me a fee to trade.
- slt2021 2y ago
  they can keep failure to deliver forever until the market moves in their desired position to actually send orders to lit market. they use derivatives and heavily recycle buy/sell shares to keep kicking the FTD can down the road for as long as the market returns to their desired position.
  - wbl 2y ago
    No they can't. They can keep a short position but that isn't failure to deliver.
    - slt2021 2y ago
      the T+1 timer can be easily reset every day, until the market price reverts back to the Citadel's modeled price at which it is profitable/least losses for them to send order to lit market
      - toast0 2y ago
        What are the mechanics of that? Let's say I buy a share of F on Monday, my brokerage routes it to Citadel, because PFOF. On Tuesday, I expect to get a share of F delivered at close of business, because T + 1. If Citadel doesn't deliver on Tuesday, what happens? Are you suggesting they would continue to not deliver the share I purchased for several days, by saying oh yeah, we'll get toast0 his shares tomorrow? That would be pretty upsetting, and I imagine I'd call my brokerage and ask them why they're dealing with Citadel if they never deliver shares on time.
snapcaster 2y ago
If you actually don't understand why that citadel statement said that you should read up on how market makers work. Any given snapshot in time for them would have enormous quantities of securities on both sides because they have to hedge all of their activities to remain neutral to any price movements. >So when exactly will that $60 billion of buy pressure hit the market? it probably did shortly after the statement, coupled with a likely similarly sized "sell pressure". They're constantly buying and selling things that's how the business model works