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Some good questions...

February 18, 2021. Summarized by summa-bot.

Compression ratio: 24.2%. 2 min read.

Congressional hearings aren't exactly known for fact-finding and informed inquiry, but we just got a bunch of really good questions directed at Robinhood executives.

Keith Gill's response: "Increased transparency could help so someone like me could have a better understanding of how those things work could be quite beneficial to retail investors. "

Congressman Brad Sherman was trying to get Citadel owner Ken Griffin to admit that Robinhood traders get a raw deal compared to Wall Street fat cats.

Sherman was referencing Robinhood's controversial payment for order flow, in which Robinhood is paid for its customers' trades by market-makers like Citadel.

FINRA fined Robinhood $1. 25 million in December 2019 for sending customer trading orders to four broker-dealers without guaranteeing the best price.

"Is the Robinhood customer getting the same price as the Fidelity customer?" Sherman asked Griffin.

"The quality of execution varies by the channel of order," Griffin said.

Maloney accused Robinhood of "vague language" and seeming to "reserve the right to make up the rules as you go along," saying that the company's statements to investors as it restricted trading were inconsistent with the explanation it later provided concerning Robinhood's regulatory requirements.

Robinhood CEO Vlad Tenev is being forced to explain his app's decision to only ban purchases of GameStop, and not sell orders as well.

Ken Griffin and Vlad Tenev will face questions over payment for order flow, which they will argue benefits retail investors by making it free to trade and giving them access to deep markets.

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.

Critics say payment for order flow creates a conflict of interest that allows market makers to trade ahead of retail investors.

(More trade orders on Robinhood means more payment for that order flow).

Jennifer Schulp, director of financial regulation studies at the Cato Institute, lauded retail investing — equities trading by individuals using brokerages such as Robinhood — in her opening testimony during Thursday's hearing.

She noted that stock ownership has traditionally been "skewed towards the already wealthy, and it is highly correlated with race, education and age. " But with the increase in popularity of retail stock trading during the pandemic, "investors who opened accounts for the first time in 2020 were younger, had lower incomes and were more racially diverse," suggesting growing equality in investing, Schulp said.

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