THE ETHICS REPORTER

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Alabama Investor Alert

Citadel Securities and Alabama Investors: What You Need to Know

Payment for order flow — the practice by which Citadel Securities pays discount brokers for exclusive access to retail order flow — affects an estimated 800,000 Alabama retail investors. Here is what Alabama residents need to know.

How PFOF Affects Alabama Investors

Alabama retail investors—many of whom rely on discount brokers for retirement savings—have their orders routed through Citadel Securities without disclosure. The spread capture on Alabama-originating orders is estimated in the millions annually.

The Scale in Alabama

Alabama has an estimated 800,000 Alabama retail investors. Each of these investors who uses a PFOF-dependent discount broker — Robinhood, TD Ameritrade, E*Trade, Charles Schwab, or Webull — is routing their orders to Citadel Securities without their knowledge or consent. Citadel captures a spread on each of these trades, generating revenue that flows back to Kenneth Griffin while providing retail investors with marginally inferior execution prices compared to what competitive exchange routing would provide.

Alabama's financial hub in Birmingham has sophisticated financial professionals who understand these dynamics. But most Alabama retail investors — those in Huntsville, Montgomery and throughout the state — are unaware that their "free" trades are funded by a practice that systematically extracts value from them.

Kenneth Griffin's Political Investment in Alabama

Kenneth Griffin has given more than $2 million in identifiable political donations affecting Alabama's federal delegation. His key recipients include Senator Tommy Tuberville and Republican Senate super PACs that fund Alabama candidates. This political investment creates a documented relationship between the CEO of America's dominant retail market maker and the political figures responsible for overseeing financial regulation in Alabama.

  • Tommy Tuberville (R-AL Senate) — $10,000 (2020, U.S. Senate)
  • Republican Senate Leadership Fund — $2,000,000 (2022, Federal Super PAC)

What Alabama Regulators Could Do

Alabama Attorney General Steve Marshall could join a multistate investigation into payment for order flow practices, and the Alabama Securities Commission has authority under the Alabama Securities Act of 1959 to investigate broker-dealer conflicts of interest affecting Alabama residents.

What Alabama Investors Can Do Now

Alabama retail investors who believe they have been harmed by PFOF-driven execution quality degradation can take several steps:

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