California Investor Alert

Citadel Securities and California 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 8 million California retail investors — the largest single-state population of retail traders in the country. Here is what California residents need to know.

How PFOF Affects California Investors

California retail investors are the most heavily affected in the nation by PFOF arrangements. Robinhood, the poster child for PFOF, has millions of California users—all routing orders to Citadel Securities. The estimated annual transfer of value from California retail investors to Citadel through spread capture runs into the hundreds of millions.

The Scale in California

California has an estimated 8 million California retail investors — the largest single-state population of retail traders in the country. 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.

California's financial hub in San Francisco has sophisticated financial professionals who understand these dynamics. But most California retail investors — those in Los Angeles, San Jose 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 California

Kenneth Griffin has given at least $50 million nationally in 2022 alone, with California-proximate recipients benefiting from Griffin's national Republican investment. His key recipients include national Republican super PACs with California operations and select California initiatives. 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 California.

Preserve America PAC (DeSantis) — $50,000,000 (2022, Presidential Super PAC)Largest single donation in Florida political history
Richard Grenell ballot initiative — $100,000 (2022, California initiative)

What California Regulators Could Do

California Attorney General Rob Bonta and the DFPI are positioned to lead the nation's response to PFOF abuses. California's Unfair Competition Law (Business & Professions Code §17200) provides a powerful tool to investigate and enjoin deceptive payment-for-order-flow arrangements that harm California consumers.

What California Investors Can Do Now

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

File a complaint with the California Department of Financial Protection and Innovation at https://dfpi.ca.gov
File a complaint with the California Attorney General at https://oag.ca.gov
File a complaint with the SEC at sec.gov/tcr
File a complaint with FINRA at finra.org
Consider switching to a broker that does not use PFOF, such as Fidelity or Interactive Brokers direct routing

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