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Robinhood and Reddit CEOs testify before House committee: Live updates

February 18, 2021. Summarized by summa-bot.

Compression ratio: 27.1%. 2 min read.

San Francisco, California, USA - January 29, 2021: GameStop stock rally on Robinhood app due to Reddit wallstreetbets subreddit

Congress grills the CEOs of Robinhood and Reddit about last month's GameStop frenzy.

Ken Griffin, the billionaire owner of hedge fund Citadel and high-speed trading firm Citadel Securities, is prepared to tell lawmakers Thursday that the trading firm helped meet retail investors’ needs during the surge in trading of GameStop (GME) and other “meme” stocks, but “had no role” in Robinhood’s decision to restrict trading of those stocks.

There may need to be “extra protections” and information disclosures for less-sophisticated investors who are day trading, particularly those investing in certain risky products, House Democrat Gregory Meeks told CNN’s Julia Chatterley ahead of today’s hearing before the House Financial Services Committee.

A senior member of the House Committee on Financial Services, Meeks said he understands Robinhood’s aims to make trading more accessible, but he wants to know if the platform is steering people towards risky products and disclosing enough information to investors.

Meeks wants to understand more about the role of short sellers, including hedge funds, in the recent market volatility and to probe the financial relationship between the Robinhood’ App and the market makers like Citadel.

Waters, the chairwoman of the powerful House Financial Services Committee, told CNN Business she will likely hold three hearings, with the first one occurring Thursday.

Robinhood CEO Vladimir Tenev is again pushing back on the idea that the app restricted buying of certain volatile stocks late last month at the direction of hedge funds or other market makers.

Among the things Tenev is expected to explain to lawmakers: the history of Robinhood, how it makes money, what financial literacy features the app provides to users and the events that led up to the company having to restrict trading of GameStop (GME), AMC (AMC) and other meme stocks.

In written testimony provided ahead of the hearing, Gill said he believed GameStop "was dramatically undervalued by the market. "

"The idea that I used social media to promote GameStop stock to unwitting investors is preposterous," Gill said in the written testimony.

Payment for order flow is the controversial practice of broker-dealers – including market makers like high-frequency trading firms – paying Robinhood and other free trading apps for executing the trades with them.

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