A nice little nugget I stumbled across is that Bernie Madoff is widely credited with being one of the first to exploit the process of buying order flow to take advantage of the bid-ask spread a.k.a. front-running. Front-running is illegal :wink wink: and every market maker in the history of the world, except for Bernie Madoff, has denied they front-run.
Citadel Buys Robinhood’s Order Flow
Bid-ask spreads have shrunk considerable since Madoff exploited this process in the 1990s, so the money to be made today per trade is tiny. But multiply that out on millions of orders and this is real money that a market maker can take advantage of. So who is the market maker that does the most business with Robinhood? Our friends at Citadel who have been in the middle of the GME fiasco. Probably nothing to see here.
Why are you dragging Mr. Met Steve Cohen into all this, Chadford?
Back in 2011 Madoff sent an email to my good pal Charles Gasparino of Fox Business. And of all the people on Wall Street that Madoff could have mentioned, who was the ONLY one he mentioned being involved with insider trading and front-running? Steve “Just Trying To Make A Living” Cohen of SAC Capital.
I get that Madoff is about as untrustworthy of a person that has ever lived, so grain of salt. I’m sure Madoff probably just randomly picked Cohen’s name out of a hat.
Oh, and likely no coincidence that Cohen’s underlings were banged by the SEC a couple years later in 2013 for insider trading. I’m sure that Steve Cohen had no idea what was going on at his own firm. The guy that sat in a desk in the middle of all his underlings. The guy that had 30% annual returns every single year FOR TWO DECADES.
Bernie only had about 10% returns. Probably nothing to see here either.
