Case 1:21-md-02989-CMA Document 470 Entered on FLSD Docket 05/13/2022 Page 1 of 53
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF FLORIDA
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`CASE NO. 21-2989-MDL-ALTONAGA/Torres
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`
`In re:
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`JANUARY 2021 SHORT SQUEEZE
`TRADING LITIGATION
`_________________________________/
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`This Document Relates to the Antitrust Actions
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`
`ORDER
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`THIS CAUSE came before the Court on Defendants’1 Motion to Dismiss the Amended
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`Antitrust Tranche Complaint [ECF No. 456], filed on February 18, 2022. Plaintiffs2 filed a
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`Response [ECF No. 459], to which Defendants filed a Reply [ECF No. 463]. The Court has
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`carefully considered the Amended Consolidated Class Action Complaint (the “Am. Compl.”)
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`[ECF No. 451], the parties’ written submissions, the record, and applicable law. For the following
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`reasons, the Motion is granted.
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`I.
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`INTRODUCTION
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`The Amended Complaint is Plaintiffs’ third attempt at pleading an antitrust conspiracy
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`claim arising from the January 2021 short squeeze. The Court dismissed Plaintiffs’ Corrected
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`Consolidated Class Action Complaint (the “CCAC”) last fall, giving Plaintiffs the opportunity to
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`amend. (See generally Nov. 17, 2021 Order [ECF No. 438]). They did so. What has changed
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`with the latest pleading? Not much.
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`1 The Defendants are Robinhood Markets, Inc.; Robinhood Financial LLC; Robinhood Securities, LLC;
`and Citadel Securities LLC. (See Am. Compl. ¶¶ 42–49).
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` The Plaintiffs are Angel Guzman, Burke Minahan, Christopher Miller, and Terell Sterling. (See Am.
`Compl. ¶¶ 23–41).
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`The CCAC described a wide-ranging conspiracy purportedly orchestrated by a market
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`maker and involving over a dozen Defendants, including introducing brokerages, self-clearing
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`brokerages, and clearinghouses. Plaintiffs alleged the market maker, Citadel Securities, pressured
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`the other Defendants to halt trading in certain stocks that had undergone rapid and historic price
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`increases due to a retail trading frenzy. According to Plaintiffs, Citadel Securities held significant
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`short positions in the affected stocks, rendering it especially vulnerable to the retail-induced short
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`squeeze.
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` Plaintiffs adequately pleaded parallel conduct among the Defendants. But there were no
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`additional factual allegations supporting a plausible inference of a conspiracy — except for
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`references to a few vague and ambiguous emails that were exchanged between a brokerage,
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`Robinhood,3 and its market maker, Citadel Securities. The Court dismissed the CCAC in its
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`entirety because a few questionable emails between two firms in an otherwise lawful business
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`relationship were not enough to support a plausible inference of an unlawful conspiracy.
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`This third time around, Plaintiffs only allege collusion between Robinhood and Citadel
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`Securities; they have dropped every other Defendant from the suit. While Plaintiffs profess to
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`have bolstered their factual allegations as to Robinhood and Citadel Securities, the allegations of
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`conspiracy are in substance the same and thus inadequate. In addition, Plaintiffs fail to plausibly
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`allege an unreasonable restraint of trade because their garbled market theory does not conform to
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`the alleged facts. The Court explains.
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`3 The Court refers to Robinhood Markets, Inc.; Robinhood Financial LLC; and Robinhood Securities, LLC,
`collectively, as “Robinhood[.]” Robinhood Financial LLC and Robinhood Securities, LLC are wholly-
`owned subsidiaries of Robinhood Markets, Inc. (See Am. Compl. ¶¶ 42–45).
`2
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`II.
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`BACKGROUND
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`This putative class action is brought on behalf of individual investors (the “Retail
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`Investors”) who suffered losses as a result of Defendants’ response to a “short squeeze” — a
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`situation in which stocks or other assets rise sharply in value, distressing short positions.4 (See
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`Am. Compl. ¶¶ 12, 15–16). This short squeeze occurred in late January 2021, as the Retail
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`Investors purchased the Relevant Securities en masse over a short period of time,5 exposing those
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`with short positions in the Relevant Securities — such as Citadel Securities — to large potential
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`losses. (See id. ¶¶ 7, 11–12, 64–66). According to Plaintiffs, Citadel Securities pressured
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`Robinhood to restrict trading on its platform, which “artificially constricted the price appreciation
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`of the Relevant Securities[,]” in violation of the Sherman Act, 15 U.S.C. § 1. (Am. Compl. ¶ 16
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`(alteration added); see id. ¶¶ 13, 67, 403–415).
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`Parties.
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`Defendants. Robinhood Markets is the corporate parent of Robinhood Financial and
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`Robinhood Securities. (See id. ¶ 42). Robinhood Financial is an introducing broker: it provides
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`financial services through an electronic trading platform, or application, where individual investors
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`can trade financial assets. (See id. ¶ 43). Robinhood Securities is a clearing broker: it handles the
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`execution, clearing, and settling of trades placed on Robinhood Financial’s application. (See id.
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`¶¶ 44, 83). Collectively, Robinhood restricted the Retail Investors’ ability to purchase the
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`4 A “short” seller borrows a security from a lender, believing the price of the security will decrease. (See
`Am. Compl. ¶ 108). It then sells the borrowed security to a buyer. (See id.). If the price of the security
`drops, the short seller buys the security back at a lower price and returns it to the lender. (See id.). The
`difference between the sell price and the buy price is the short seller’s profit. (See id.). Conversely, the
`short seller loses money if the price of the security increases. (See id.).
`
` The “Relevant Securities” are certain stocks the Retail Investors believed would increase in price:
`GameStop (GME), AMC Entertainment (AMC), Bed Bath & Beyond (BBBY), BlackBerry (BB), Express
`(EXPR), Koss (KOSS), Nokia (NOK), Tootsie Roll Industries (TR), and Trivago NV (TRVG). (See Am.
`Compl. ¶ 7).
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`Relevant Securities between January 28, 2021, and February 4, 2021 (the “Class Period”). (See
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`id. ¶¶ 46, 55).
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`Citadel Securities is a market maker: it acts as a market participant by providing bid and
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`ask prices for securities, maintaining an inventory of securities from its own trading, and matching
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`incoming buy and sell orders to fill those orders. (See id. ¶¶ 48, 85). Citadel Securities took short
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`positions in the Relevant Securities during the period in question. (See id. ¶ 49).
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`Plaintiffs. The named Plaintiffs are four individual investors who were subject to trading
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`limitations imposed on the Relevant Securities during the Class Period. (See id. ¶¶ 23–41). Each
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`Plaintiff held shares of one or more of the Relevant Securities at the close of the stock market on
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`January 27, 2021. (See id. ¶¶ 23, 28, 33, 38). The next day, January 28, 2021, they were all
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`prohibited from purchasing the Relevant Securities on Robinhood’s trading platform. (See id.
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`¶¶ 24, 29, 34, 39).
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`That same day, Guzman and Miller applied for accounts with Charles Schwab, Fidelity,
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`and TD Ameritrade — these did not prohibit customers from purchasing the Relevant
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`Securities — but Guzman and Miller were unable to complete purchases due to the amount of time
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`required to set up the accounts. (See id. ¶¶ 25, 35). Minahan successfully applied for an account
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`with Fidelity and was able to purchase a share of GameStop stock that day. (See id. ¶ 30). Each
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`Plaintiff then sold his or her shares of the Relevant Securities on Robinhood between January 28,
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`2021, and February 4, 2021. (See id. ¶¶ 26–27, 31–32, 36–37, 40–41).
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`Injury and proposed class. According to Plaintiffs:
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`As a direct and intended result of Defendants [sic] contract, combination,
`agreement and restraint of trade or conspiracy, Defendants caused injury to
`Plaintiffs by restricting purchases of Relevant Securities. Robinhood deactivated
`the buy option on its platform and left Plaintiffs and Class members with no option
`but to sell or hold shares of the stocks on their platforms. Plaintiffs and Class
`members, faced with an imminent decrease in the price of their positions in the
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`CASE NO. 21-2989-MDL-ALTONAGA/Torres
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`Relevant Securities due to the inability of Retail Investors to purchase shares, were
`induced to sell their shares in the Relevant Securities at a lower price than they
`otherwise would have, but for the conspiracy, combination, agreement and restraint
`of trade. Additionally, Class members that would have purchased more stock in
`the Relevant Securities given the upward trend in price could not do so.
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`(Id. ¶ 410 (alterations added)).
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`Plaintiffs seek to certify the following class:
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`All persons or entities in the United States that held shares of stock or call options
`through Robinhood in GameStop Corp. (GME), AMC Entertainment Holdings Inc.
`(AMC), Bed Bath & Beyond Inc. (BBBY), BlackBerry Ltd. (BB), Express, Inc.
`(EXPR), Koss Corporation (KOSS), Nokia Corp. (NOK), Tootsie Roll Industries,
`Inc. (TR), or Trivago N.V. (TRVG) as of the close of market on January 27, 2021,
`and sold the above-listed securities from January 28, 2021 up to and including
`February 4, 2021 (the “Class Period”).
`
`
`(Id. ¶ 55).
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`Alleged facts.
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`Mechanics of securities trading on Robinhood. Individual investors’ market share of U.S.
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`equity trading has steadily increased since 2019 and has recently accounted for a third of all U.S.
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`stock market trading. (See id. ¶¶ 92–93). When individual investors make investments on their
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`own behalf, they execute their personal trades through websites, apps, and trading platforms
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`provided by brokerage firms or other investment service providers. (See id. ¶ 6).
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`Robinhood Financial provides one such trading application to individual investors. (See
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`id. ¶¶ 6, 43, 68). Robinhood Financial is one of the largest retail brokers in the United States —
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`the trading demand of its over 31 million users substantially influences the movements of stock
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`prices. (See id. ¶¶ 70–72).
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`Once a trade is placed on Robinhood Financial’s application, the customer’s cash and
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`securities are custodied by Robinhood Financial’s clearing broker, Robinhood Securities. (See id.
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`¶ 83). Robinhood Securities services the customer’s account by executing, clearing, and settling
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`the trade order. (See id.).
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`Although individual investors historically had to pay a fee or commission to their
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`brokerages for executing personal trades, today most brokerages do not charge their investors a
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`fee per transaction. (See id. ¶ 8). Rather, in exchange for routing the order to a market maker,
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`brokerages earn revenue through rebates, kickbacks, and other payments — known collectively as
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`payment for order flow (“PFOF”). (See id. ¶¶ 8, 73).
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`Robinhood Securities typically routes a customer’s trade order to a large market maker like
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`Citadel Securities. (See id. ¶¶ 74, 84). As a market maker, Citadel Securities fills these orders
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`from its own inventory, by routing the order to an exchange, or by taking the other side of a
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`transaction (e.g., selling a security short in response to receiving an order to buy the security). (See
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`id. ¶¶ 85–86). Once an order is filled, the market makers pocket the difference between the bid
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`and ask prices; this is known as the “spread.” (Id. ¶¶ 74, 85). While the spreads may be small,
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`they are significant in the aggregate due to the large volume of orders filled. (See id.).
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` After an order is filled, the details of the executed order are sent to the National Securities
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`Clearing Corporation (“NSCC”) for clearinghouse and settling services. (See id. ¶ 87). Because
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`trades do not settle immediately, there is a risk that a party to a transaction may default before the
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`trade is completed. (See id. ¶¶ 87–88). The NSCC clears cash transactions by netting securities
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`deliveries and payments among NSCC’s clearing members and guaranteeing the completion of
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`trades, even if one party to the transaction defaults. (See id. ¶ 88). Thus, if a clearing member
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`such as Robinhood defaults on its settlement obligations, the NSCC guarantees the delivery of
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`cash and securities to its non-defaulting members. (See id.).
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`The NSCC collects clearing fund contributions, or margin, from clearing members at the
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`start of each day and intraday in volatile markets. (See id. ¶ 90). The margin protects the NSCC
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`and all market participants against clearing member defaults, and margin requirements must be
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`met by clearing members on a timely basis. (See id.). Margin requirements are largely based on
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`risk and market volatility. (See id.). The rules for calculating the contribution requirements and
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`the timing of the collection of contributions are known to every clearing member; and the NSCC
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`provides reporting tools, calculators, and documentation to allow the members to monitor their
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`risk in near real-time and estimate clearing fund contribution requirements. (See id.).
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`January 2021 market volatility. Retail Investors often exchange investment information
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`via online discussion forums like Facebook, TikTok, and, most relevant here, the WallStreetBets
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`financial discussion forum on Reddit. (See id. ¶¶ 64, 95, 127–28). WallStreetBets is characterized
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`by a particular culture centered around the discussion of financial investments and memes; many
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`of its users are sophisticated and shrewd individual investors. (See id. ¶ 128).
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`Beginning in 2019, the Retail Investors, through these online discussion forums,
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`hypothesized that shares of GameStop’s stock were significantly undervalued, trading at much
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`lower prices than they should have been, based on GameStop’s publicly available financial
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`disclosures and prospects. (See id. ¶¶ 95–96). The Retail Investors saw similar investment
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`opportunities in the other Relevant Securities. (See id. ¶¶ 97–98).
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`One such Retail Investor, the popular Reddit and YouTube user, Roaring Kitty, deduced
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`that GameStop was undervalued for a variety of reasons, including substantial short positions that
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`large financial institutions had taken against the stock. (See id. ¶¶ 96, 127). Roaring Kitty
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`continuously published his investments on WallStreetBets, such as his initial purchase of $50,000
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`of GameStop; he also posted an in-depth analysis of GameStop’s stock on his YouTube channel
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`in August 2020. (See id. ¶¶ 127, 129).
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`Leading up to January 27, 2021, the Retail Investors purchased long positions in the
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`Relevant Securities — primarily through Robinhood — with the expectation that the stocks would
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`increase in value. (See id. ¶¶ 7, 64, 101). As more investors purchased the Relevant Securities
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`and “out of the money” call options6 in the Relevant Securities, the market prices for the stocks
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`rose due to supply and demand. (Id. ¶¶ 99, 114). The Relevant Securities started appreciating to
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`“unprecedented levels.” (Id. ¶ 15).
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`To illustrate this rapid growth, a share of GameStop stock traded for as low as $2.00 a share
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`in 2019 (see id. ¶ 130); $43.03 on January 21, 2021 (see id. ¶ 132); $76.79 on January 25, 2021
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`(see id.); $147.98 on January 26, 2021 (see id. ¶ 135); and $380.00 on January 27, 2021 (see id.
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`¶ 137). GameStop’s stock price reached a closing high of $347.51 on January 27, 2021 — a
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`134.84% increase from the previous day. (See id.). Other Relevant Securities experienced similar
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`surges; for example, AMC’s and Express’s share prices increased over 300% and 200%,
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`respectively. (See id.).
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`As Retail Investors increased long positions in the Relevant Securities, those who held
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`short positions in the Relevant Securities, such as Citadel Securities (see id. ¶¶ 11, 141–42), were
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`caught in a short squeeze. (See id. ¶¶ 114–15). Investors with these short positions faced a rapid
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`increase in the shorted assets’ values, exposing short sellers to even greater losses because the
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`short sellers must at some point buy back the stocks to return them to their lenders. (See id. ¶¶ 12,
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`115).7
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`6 A call option gives the holder the right to buy the asset at a stated fixed price or the “strike price.” (Am.
`Compl. ¶ 114). An “in the money” option has a favorable strike price because it is lower than the market
`price of a stock (id. ¶ 119), while an “out of the money” option has an unfavorable strike price because it is
`higher than market price for the underlying asset (id. ¶ 120). If an option expires while out of the money,
`the contract becomes valueless. (See id. ¶¶ 119–120, 140, 294).
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` 7
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` Another phenomenon known as a “Gamma squeeze” occurred as the prices of the Relevant Securities
`increased. (Am. Compl. ¶¶ 114, 116). Options are priced based on a variety of risk variables, including
`one called “Gamma,” which increases as the option nears its expiration date or as the option approaches its
`strike price (i.e., “being in the money”). (Id. ¶¶ 121, 123–26). When a security experiences a sharp price
`increase, the Gamma increases; stated differently, options that were previously unlikely to reach their strike
`prices before expiration become more likely to do so. (See id. ¶¶ 124–26). As the Gamma increases, market
`makers hedge by purchasing more of the underlying security, which further drives the price of the security
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`Around 5:00 p.m. on January 27, 2021, the SEC released a statement indicating it was
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`“aware of and actively monitoring the on-going market volatility in the options and equities
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`markets[.]” (Id. ¶ 144 (alteration added; quotation marks omitted)). It declined to step in and
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`restrict trading, however. (See id.).
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`Events of January 28, 2021. Right before markets opened on January 28, 2021, analytics
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`captured a significant volume of GameStop short transactions. (See id. ¶ 156). Retail brokers
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`generally do not allow individual investors to engage in after-hours trading to the same extent as
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`institutional investors, so this increase in short volume was likely the result of institutional
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`investors, like Citadel Securities, taking new short positions. (See id. ¶ 157). Additionally, failure
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`to delivers (“FTDs”), which occur when one of two transacting parties fails to meet its obligations
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`in a securities trade, rose dramatically in the period leading up to January 28, 2021, a phenomenon
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`consistent with increasing short interest by market makers like Citadel Securities.8 (See id. ¶¶ 161,
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`165).
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`This increase in short positions baffled some observers. (See id. ¶ 175). The dominant
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`view in many financial discussion forums reflected a high degree of excitement and motivation
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`among Retail Investors. (See id.). Many announced plans to increase long positions in the
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`Relevant Securities on January 28, 2021. (See id.).
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`Around 1:00 a.m. EST on January 28, 2021, Robinhood informed its users that in the face
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`of unprecedented volatility surrounding GameStop and AMC stock, all GameStop and AMC
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`options with expirations of January 29, 2021 would be set to closing transactions only. (See id.
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`higher and creates a feedback loop as even deeper out of the money options approach their strike price.
`(See id. ¶ 126).
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` FTDs can be strong indicators of naked short selling, which occurs when a short seller does not actually
`possess the security it is supposed to borrow, or of market makers taking on more short positions. (See Am.
`Compl. ¶¶ 162–63).
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`¶ 176). Apparently, the restrictions would help Robinhood reduce risk. (See id.). For the
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`immediate future, customers could close out their positions in GameStop and AMC but could not
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`make new investments. (See id.).
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`At 5:11 a.m. EST, Robinhood received an email from the NSCC titled “NSCC Daily
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`Margin Statement” advising Robinhood had a collateral requirement deficit of over $3 billion. (Id.
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`¶ 178). At 8:00 a.m. EST, Gretchen Howard, Robinhood’s COO, messaged internally that
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`Robinhood had a “major liquidity issue” and was moving the Relevant Securities to Position Close
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`Only (“PCO”), meaning Robinhood users could sell the Relevant Securities but could not buy
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`them. (Id. ¶¶ 179–80 (quotation marks omitted)). Around that same time, David Dusseault,
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`Robinhood Financial’s President and COO, said in another internal message, “we will navigate
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`through this [NSCC] issue[,]” and “we are to [sic] big for them to actually shut us down[.]” (Id.
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`¶ 182 (alterations added)). Robinhood negotiated with the NSCC to significantly reduce its margin
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`requirements and was subsequently able to meet its revised NSCC deposit requirement shortly
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`after 9:00 a.m. EST. (See id. ¶¶ 183–185).
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`Robinhood moved the Relevant Securities to PCO by the time the markets opened on
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`January 28, 2021. (See id. ¶¶ 179–180). To their surprise, Robinhood users were no longer able
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`to purchase the Relevant Securities — the “buy” button was deactivated as a feature, leaving users
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`with no option but to sell or hold their securities. (See id. ¶¶ 186–88). Further, Robinhood blocked
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`users on its web platform and mobile app from searching for the Relevant Securities’ ticker
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`symbols. (See id. ¶ 190). Robinhood also canceled overnight purchase orders of the Relevant
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`Securities placed on January 27, 2021, which were queued to move forward when the markets
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`opened on January 28, 2021. (See id. ¶ 188).
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`Customers were not given advance notice of the switch to PCO for the Relevant Securities.
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`(See id. ¶ 185). Robinhood announced the news via Twitter on January 28, 2021, stating it was
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`restricting the Relevant Securities to PCO due to market volatility. (See id. ¶¶ 192–94).
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`Other brokerages also restricted trading, adjusted margin requirements, or restricted trading
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`strategies.9 (See id. ¶¶ 195, 365–67). On January 28, 2021, Ally, Dough, Public.com, SoFi, Stash,
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`Tastyworks, and WeBull restricted purchases of two or three of the Relevant Securities;10 E*Trade
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`restricted purchases of GameStop and AMC; and Interactive Brokers restricted trading on options.
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`(See id.). Charles Schwab and TD Ameritrade did not halt trading but instead adjusted margin
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`requirements for certain securities and restricted certain strategies usually employed by advanced
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`traders. (See id. ¶ 365).
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`The broad prohibition on buying the Relevant Securities spawned a massive sell-off, which
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`sent prices of the Relevant Securities tumbling. (See id. ¶ 197). For example, on January 28, 2021,
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`GameStop shares reached an intraday peak of $483.00 before dropping down to a closing price of
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`$193.60 — a staggering 44.29% drop from the prior day’s closing price of $347.51. (See id.
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`¶ 198). Similarly, AMC shares dropped 56.63%, EXPR shares fell 50.79%, and BBBY shares
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`declined 36.40%. (See id.). The Retail Investors who wanted to take advantage of the price drops
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`to buy more shares of the Relevant Securities were unable to do so due to the prohibition on
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`purchasing. (See id.).
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`While individual investors were prohibited from purchasing the Relevant Securities,
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`institutional investors were not. (See id. ¶ 209). Large investment firms and market makers such
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`9 Internal Robinhood documents show Robinhood actively monitored the actions of other broker-dealers.
`(See Am. Compl. ¶ 196).
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`10 Many of these brokerages reported that their clearing firm, Apex, was responsible for implementing the
`restrictions. (See Am. Compl. ¶ 195). Apex only imposed restrictions on January 28, 2021. (See id.).
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`as Citadel Securities were able to purchase the Relevant Securities at artificially reduced prices
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`because they had access to private stock exchanges known as “dark pools.”11 (Id.). As the Retail
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`Investors sold their shares in the Relevant Securities because of the trading restrictions, firms like
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`Citadel Securities bought the Relevant Securities at artificially reduced prices to close out their
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`short positions. (See id. ¶¶ 209–10).
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`Events after January 28, 2021. When the market opened on January 29, 2021, Robinhood
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`lifted its trading restrictions and permitted individual investors to open new long positions in the
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`Relevant Securities; even so, Robinhood continued to heavily restrict such purchases. (See id.
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`¶¶ 249–51). For example, Robinhood placed limitations on the number of new positions its users
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`could open in the Relevant Securities, restricting purchases of GameStop stock to two shares and
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`then to one share. (See id. ¶¶ 253–55). It maintained trading limitations on certain securities
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`through February 4, 2021 (see id. ¶ 261); further suppressing the value of the Relevant Securities
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`and pressuring investors to sell, rather than buy or hold (see id. ¶¶ 251, 255–56).
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`On January 31, 2021, Vlad Tenev, Robinhood’s CEO, explained in an opinion piece
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`published in USA TODAY that Robinhood maintained trading restrictions because clearinghouse-
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`mandated deposit requirements were “increased ten-fold.” (Id. ¶ 262 (quotation marks omitted)).
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`Two days earlier, Robinhood had announced that it raised more than $1 billion to help meet rising
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`demands for cash and shore up its balance sheet. (See id. ¶ 261). Robinhood raised this money
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`on top of $500 million it accessed through credit lines to ensure it had sufficient capital to allow
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`its clients to trade the Relevant Securities. (See id.). On February 1, 2021, Robinhood announced
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`11 Private stock exchanges are known colloquially as “dark pools” or “dark exchanges” because they do not
`disseminate public quotations of securities prices. (Am. Compl. ¶¶ 104–07). Through these private
`exchanges, institutional investors can discreetly buy or sell securities in large blocks, mitigating some of
`the price impacts that their buying or selling activity would otherwise have on a “lit,” or public, national
`securities exchange. (Id. ¶ 106).
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`12
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`it had raised an additional $2.4 billion in funding above the $1 billion it had already raised. (See
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`id.). Weeks later, Tenev testified before the U.S. House Committee on Financial Services that
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`Robinhood had met its revised deposit requirements a little after 9:00 a.m. on January 28, 2021.
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`(See id. ¶ 264).
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`Publicly available data reveal short interests12 in the Relevant Securities climbed steadily
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`in the weeks leading up to January 28, 2021 (see id. ¶¶ 269–70, 284); and then decreased because
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`of the trading restrictions imposed during the Class Period, with the sharpest and most significant
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`decreases occurring after the restrictions imposed on January 28, 2021 (see id. ¶¶ 265, 269–72).
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`FINRA data show significant increases in dark pool trading activity for each of the Relevant
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`Securities on and around January 28, 2021, during the period when restrictions were first placed
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`on the Relevant Securities. (See id. ¶¶ 273–79). Institutions dominate trading in dark pools and
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`dark exchanges, which are generally beyond the reach of individual investors, so this activity
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`indicates high institutional investor trading activity consistent with the exiting of short positions.
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`(See id. ¶ 280).
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`The scale of Citadel Securities’s business also indicates that the bulk of the activity
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`captured by this FINRA data can be attributed to Citadel Securities. (See id. ¶¶ 281–84). Because
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`Citadel Securities accounts for about 50% of dark trading activity, a large shift in the percentage
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`of sales represented by short trades is likely to be caused by a shift in Citadel Securities’s position
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`from long to short or vice versa. (See id. ¶ 283).
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`Collusion between Defendants. Plaintiffs allege that Robinhood and Citadel Securities
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`colluded to limit buy-side trading in the Relevant Securities so that Citadel Securities could recoup
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`12 “Short interests” are defined as the number of shares of a security that have been sold short but have not
`yet been covered or closed out. (Am. Compl. ¶ 268).
`13
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`losses in its short positions caused by the rise of the Relevant Securities’ prices. (See id. ¶ 154
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`(alterations added)).
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`Motive to collude. According to Plaintiffs, “Robinhood and Citadel Securities shared a
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`common motive to conspire — to protect their individual self-interest over the welfare of
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`Robinhood’s users. Robinhood restricted competition on its platform to protect itself and Citadel
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`from hemorrhaging losses totaling potentially billions of dollars.” (Id. ¶ 393). Further, “in light
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`of its planned 2021 IPO, Robinhood simply could not run the risk that its ‘transaction-based
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`revenue would be impacted negatively’ should Citadel Securities terminate its relationship with
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`Robinhood.” (Id. ¶ 401; see also id. ¶¶ 318, 400).
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`PFOF is Robinhood’s primary source of revenue. (See id. ¶¶ 5, 75, 316). Market makers
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`such as Citadel Securities pay more for Robinhood’s order flow than they do for Robinhood’s
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`competitors. (See id. ¶¶ 76, 402). Today, Robinhood derives somewhere between 60% to 70% of
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`its revenue from selling PFOF to market makers like Citadel Securities. (See id. ¶¶ 73–75).
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`Citadel Securities alone was responsible for 29% of Robinhood’s revenue in 2019, 34% in 2020,
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`and 43% of Robinhood’s PFOF revenue in the first quarter of 2021. (See id. ¶¶ 5, 78, 80, 318).
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`Indeed, Citadel Securities is Robinhood’s primary source of revenue. (See id. ¶ 5).
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`In its Form S-1, Robinhood stated:
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`For the three months ended March 31, 2021, 59% of our total revenues came from
`four market makers. If any of these market makers, or any other market makers
`with whom we do business, were unwilling to continue to receive orders from us
`or to pay us for those orders (including, for example, as a result of unusually high
`volatility), we may have little to no recourse and, if there are no other market
`makers that are willing to receive such orders from us or to pay us for such orders,
`or if we are unable to find replacement market-makers in a timely manner, our
`transaction-based revenue would be impacted negatively.
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`(Id. ¶ 81; see also id. ¶ 317 (“As set forth in Robinhood’s Registration Statement, Robinhood’s
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`‘PFOF . . . arrangements with market makers are not documented under binding contracts.’”
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`(alteration in original)).
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`Citadel Securities possessed significant short positions in the Relevant Securities during
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`the period in question. (See id. ¶ 394). As the prices of the Relevant Securities increased, Citadel
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`Securities was exposed to “potentially infinite” losses. (Id.). As of December 31, 2020, Citadel
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`Securities reported $57.5 billion in “securities sold, not yet purchased, at fair value” — which are
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`“likely representative of Citadel Securities’s short position.” (Id. ¶ 395 (quotation marks
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`omitted)).
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`Plaintiffs conclude t