Kentucky Investor Alert

Citadel Securities and Kentucky 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 750,000 Kentucky retail investors. Here is what Kentucky residents need to know.

How PFOF Affects Kentucky Investors

Kentucky retail investors depend heavily on employer-sponsored plans and discount brokers. The state's coal and manufacturing economies have left many workers with IRA accounts subject to PFOF-based order routing.

The Scale in Kentucky

Kentucky has an estimated 750,000 Kentucky 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.

Kentucky's financial hub in Louisville has sophisticated financial professionals who understand these dynamics. But most Kentucky retail investors — those in Lexington, Bowling Green 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 Kentucky

Kenneth Griffin has given more than $2 million to Kentucky-linked political figures and organizations. His key recipients include Senator Mitch McConnell's leadership PAC and the NRSC — McConnell was Senate Majority Leader during the period of PFOF controversy and took no action on market structure reform. 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 Kentucky.

Mitch McConnell Leadership PAC — $1,000,000 (2020, Senate Majority Leader Super PAC)
National Republican Senatorial Committee — $1,000,000 (2022, Federal Super PAC)

What Kentucky Regulators Could Do

Kentucky Attorney General Russell Coleman and the Kentucky Department of Financial Institutions have authority under the Kentucky Securities Act (KRS Chapter 292) to investigate broker-dealer practices.

What Kentucky Investors Can Do Now

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

File a complaint with the Kentucky Department of Financial Institutions at https://kfi.ky.gov
File a complaint with the Kentucky Attorney General at https://ag.ky.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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