NEW YORK - Hedge fund firm Citadel Investment Group LLC on Monday said it terminated a plan to sell 120 million shares of E*Trade Financial Corp over the next three months.

Chicago-based Citadel, E*Trade's largest stock and bond holder, had on Aug. 11 announced a stock trading plan that would have commenced Monday. Citadel, whose chief executive now sits on E*Trade's board and is deemed an insider, said no shares were sold under the plan.

Citadel said a sale of 120 million shares would have represented slightly over 10 percent of Citadel's holdings assuming all of convertible securities were exchanged for common stock. Citadel said it holds more than 1.1 billion E*Trade stock on this basis, plus its existing E*Trade debt.

Citadel believes that the termination of the plan at this time is in the best interests of E*Trade and all of its stakeholders, the firm said in a statement. A spokeswoman for the firm declined to comment further.

The announcement comes a little more than two weeks after U.S. banking regulators, who oversee E*Trade's mortgage and deposit-taking businesses, halted review of a proposal that would have sent nearly all of the online brokerage's customer trades through a Citadel market-making unit. (Reporting by Joseph A. Giannone, editing by Maureen Bavdek)

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