Citadel doesn't pay RH for executing the flow. Citadel pays RH to see the flow and get first chance access, because it's "dumb money" flow, and access to "dumb money" is vital to hedge funds - that's how they make most of the money, since games they play are mostly zero sum (unlike long-term investors) and winning zero-sum game against institutional mutual fund manager is much harder than against a crowd of unsophisticated randos. They also give the clients slightly worse price than they'd otherwise get (which is illegal and RH has been fined for that). But hey, trades are free!
But they may be right about the clearing risks part (that is unclear as of yet). But:
Update: the plot thickens ... the_dtcc may have exercised its right to add additional margin charges for a set of these stocks. It's a Margin Liquidity Adjustment Charge.
If they raised the margin brokers have to post on GME to 100%, it raises legitimate questions. Another natural question is regulatory role.
So it looks like not just RH took unilateral action, but DTCC forced them to.
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But they may be right about the clearing risks part (that is unclear as of yet). But:
Update: the plot thickens ...
If they raised the margin brokers have to post on GME to 100%, it raises legitimate questions. Another natural question is regulatory role.
So it looks like not just RH took unilateral action, but DTCC forced them to.