The Revenue Estimate
Industry analyses and regulatory filings suggest Citadel Securities generates between $7 billion and $15 billion in annual revenue, depending on market conditions. The firm's revenue is highly sensitive to market volatility — periods of high volatility increase trading volumes and spreads, amplifying Citadel's earnings. The COVID-19 volatility in 2020 and the meme stock frenzy in 2021 were, ironically, enormously profitable periods for Citadel.
Where the Revenue Comes From
Citadel Securities' primary revenue sources are: (1) the bid-ask spread on internalized retail orders; (2) PFOF net of costs; (3) proprietary HFT strategies that exploit information advantages from processing retail flow; and (4) liquidity provision fees on exchanges. Each of these sources is directly or indirectly connected to the retail order flow that discount brokers route to Citadel through PFOF arrangements.
What Retail Investors Contribute
If Citadel's annual revenue from retail-related market making is in the range of $5-10 billion, and there are approximately 100 million active retail trading accounts in the United States, each active retail trading account contributes approximately $50-100 per year to Citadel's revenue through execution quality degradation — even accounting for the 'price improvement' Citadel claims to provide.