Regulator delays decision on E*Trade, Citadel deal

August 15, 2009

e-trade   WASHINGTON, Aug 14 (Reuters) – U.S. regulators on Friday suspended their consideration of an application from E*Trade Financial <ETFC.O> that would have resulted in routing more of the online broker’s trades through Citadel Investment Group’s market-making operation.
   The Office of Thrift Supervision “suspended consideration of the application while we examine certain issues,” spokesman William Ruberry said, declining to say what the issues were.
   Citadel and E*Trade struck a tentative deal in June that would require the online broker to begin routing 97.5 percent of its customers’ Nasdaq stock and stock option trades to the hedge fund’s market-making operation.
   The deal requires OTS approval, and Friday was the deadline for the regulator’s decision.
   Citadel, which has twice injected capital into struggling E*Trade, said on Thursday it would slash its investment by more than two-thirds over the next few months.
    Ruberry said there is no specific timeframe for any final decision on the application.
   “It depends on how long it will take to resolve whatever issues,” he said.
   E*Trade sends about 40 percent of its customer trades to Citadel’s market-making operation under a nearly 2-year-old agreement. That agreement coincided with the hedge fund’s initial $2.5 billion investment in E*Trade.
   Chicago-based Citadel said on Thursday it plans to sell 120 million of its 166 million E*Trade shares, which will leave Citadel with a roughly 4.1 percent stake.
   Citadel founder and Chief Executive Kenneth Griffin, who joined the E*Trade’s board on June 8, intends to remain a director. Citadel said it will maintain significant holdings in the broker’s debt and will likely end up as E*Trade’s largest stockholder after the sales.
   Citadel reported a 14.9 percent stake in E*Trade as of Monday.
   (Reporting by Karey Wutkowski in Washington and Joseph A. Giannone in New York; Editing by Richard Chang) ((E-mail:karey.wutkowski@thomsonreuters.com +1 202 898 8374)) Keywords: ETRADE/CITADEL 
  
Friday, 14 August 2009 23:10:44RTRS [nN14320051] {C}ENDS

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