A multi-district litigation targeting dozens of brokers, hedge funds and clearinghouses, continues at the Florida Southern District Court, with Citadel Securities – a defendant in the antitrust tranche of the lawsuit, fighting conspiracy accusations.
On October 26, 2021, Citadel filed a notice of supplemental authority with the Court. The document, seen by FX News Group, makes it clear that Citadel would rely on a recent report by the Securities and Exchange Commission (SEC). That is, the SEC report constitutes a document seen by Citadel as supportive of its motion to dismiss the complaint against it.
According to the plaintiffs, this case is about individual investors who invested their money in the stock market and were stripped of their rights to control their own investments. The traders accuse the defendants and other market players of hatching an anticompetitive scheme to restrict Retail Investors’ access to the stock market and prevent the market from operating freely and fairly.
The defendants argue that the plaintiffs have utterly failed to plead a cognizable antitrust claim that can survive a motion to dismiss. According to the defendants, what is missing from the complaint are, inter alia,
- sufficient factual allegations of any agreement between any Defendants (let alone among all of them) to restrict trading in any security;
- any attempt to identify any benefit that any of the brokers (self-clearing or otherwise) received from allegedly restricting trading to help Citadel Securities; or
- any plausible explanation for how a conspiracy arose that resulted in the members imposing disparate restrictions on disparate sets of stocks, while at the same time other brokers not alleged to be part of the conspiracy and/or now voluntarily dismissed from the case took similar steps.
Citadel Securities now refers to SEC’s Staff Report on Equity and Options Market Structure Conditions in Early 2021.
In the Report, the SEC reviewed the causes of the January 2021 trading restrictions. Although the SEC noted “one narrative” that “attributed the broker-dealer trading restrictions to pressure from hedge funds and their commercial partners,” the SEC instead concluded: “A number of clearing brokers experienced intraday margin calls from a clearinghouse. In reaction, some broker-dealers decided to restrict trading in a limited number of individual stocks in a way that some investors may not have anticipated.”
According to Citadel, the Report pertains to, inter alia:
- Plaintiffs’ argument that “Government investigations are indicative of anticompetitive collusion” and specifically that it is “indicative of collusion” that the SEC is “investigating the events concerning the January 28, 2021 trading restrictions”;
- Defendants’ argument that “the enforcement of Plaintiffs’ claims would create . . . conflict between the Exchange Act and the Sherman Act . . . because the SEC is currently investigating the January 2021 short squeeze events”.
The lawsuit continues in the Florida Southern District Court.