Vlad Tenev, CEO of Robinhood, took up a lot of space in today’s House Financial Services Committee hearing on January market volatility.
None of the representatives seemed particularly interested in giving the screws to Reddit CEO Steve Huffman, and many seemed to be giving Keith Gill the same props as the rest of us.
These are not the market manipulators that you are looking for
Gill was, in fairness, the most personable character who introduced his remarks by saying, “A couple of things I’m not: I’m not a cat and I’m not an accredited investor.” Gill, who really started this chain of events by reporting on his investment in GameStop in June 2019, even doubled his opinion that GME remains a good buy today at current prices. This despite the fact that the wild GME trade has sparked criminal investigations.
This lack of control over Gill and Huffman does much to allay widespread fear that the events surrounding the explosive trading of GameStop (GME) shares in late January would investigate the role of social media platforms in potential market manipulation .
In fact, as the House Antitrust Subcommittee announced today more hearings to examine the biggest players on social media. Reddit appears to have flown under the radar for the time being.
Noting this rare area of consensus, Congressman Warren Davidson, who sits on the committee, told Cointelegraph, “I was hopeful from the start because AOC stood up for Reddit users at the start of the news cycle and said these people should have a right on trade. And then, on the other end of the political spectrum, Ted Cruz said, “Well, we agree.”
Tenev’s business model
Although Republicans were broadly more lenient than Democrats when it came to Robinhood’s activities, and specifically the company’s controversial stance to buy but not sell GME and other high volatility stocks, everyone wanted answers from Tenev.
Robinhood’s nature of the flow-to-order revenue model, which advertises itself as commission-free, has been mass-tested, as has its reliance on a $ 3 billion capital injection to meet collateral requirements.
“I believe a security flaw has been clearly identified in your business model,” said Congressman Anthony Gonzales when questioning Tenev. “We just can’t live in a world where my constituents can liquidate their stocks if they can’t make capital calls.”
Many launched Robinhood’s claims that it was concerned with the democratization of finance. Tenev has consistently pushed the $ 35 billion figure as a total gain from Robinhood users. Rep. Jim Himes said, “You and all other finance professionals know that without a return this is meaningless.”
But while today’s hearing revealed a lot of hostility towards Tenev, it wasn’t all that educational.
Despite chairman Maxine Waters’ admonition that “this is not political theater at all,” there appeared to be no concerted sense of solutions to the epic trade that fueled GameStop’s (GME) meteoric rise in late January.
Real-time solution?
Some suggestions, including from Tenev himself as well as Davidson, were that if the US had traded on the day of, not two days later, the situation would not have worked out at all – labeled T-0 instead of T-2. Tenev commented, “The existing two day period to complete trades puts investors and the system at risk.”
Kenneth Griffin, CEO of Citadel, which he called “the world’s greatest market maker”, denied the likelihood of a real-time system for securities trading in the next few years, saying, “The problem is, everything has to work perfectly. “Real-time trading, he said,” requires that every part of the workflow be perfectly synchronized between the parties. ” Davidson disagreed, saying, “In your company, the technology is clearly there for trading companies involved in high-frequency trading.”
Davidson noted the possible role of the blockchain. The potential of security tokens to solve problems with intermediaries and brokers has been one of the long-promised benefits of blockchain, although that is changing.
Today’s hearing was just the beginning, confirmed Chairwoman Waters. She said the committee aimed to hold two more with different witnesses.
