Vlad Teneff, CEO of Robinhood, took the hot seat at today’s hearing before the House Financial Services Committee on January market volatility.
None of the actors were particularly interested in putting nails on Reddit CEO Steve Hoffman, and many seemed to have given Keith Gill the same props the rest of us gave.
These aren’t the market manipulators you’re looking for
Jill, in all fairness, was the character most liked, offering his observations by saying “Some of the things I don’t do: I’m not a cat and I’m not a certified investor.” Jill, who had already kicked off this chain of events by posting about his GameStop investment in June 2019, reiterated his opinion that GME is still a good buy today, at current prices. This is despite the fact that GME’s wildcat trade has attracted criminal investigations.
This lack of scrutiny toward Gill and Huffman does much to assuage widespread concerns that events surrounding the explosive trading in GameStop (GME) stocks at the end of January will trigger investigations into the role of social media platforms in potential market manipulation.
That’s even when the House Antitrust Subcommittee today announced more hearings to screen the biggest players on social media. Reddit, for now, appears to have flown under the radar.
Congressman Warren Davidson, a member of the committee, pointed to this rare area of consensus, telling Cointelegraph: “I was hoping immediately out of the gate because early in the news cycle, AOC was committed to Reddit users, saying it’s a right to trade.” Then Ted said. Cruz, on the other end of the political spectrum, is, “Well, we agree.”
Tenif business model
Although Republicans were broadly more lenient than Democrats in addressing Robinhood’s activity, particularly the company’s controversial shutdown to buy GME and other highly volatile stocks, but not sell them, everyone wanted answers from Tenev.
The nature of Robinhood’s revenue model, which relies on selling an order flow while declaring itself as commission-free, is under comprehensive scrutiny, as is its reliance on an infusion of $ 3 billion of capital to meet collateral requirements.
“I think a vulnerability has been exposed in your business model,” Congressman Anthony Gonzalez said while questioning Tennev. “We cannot live in a world where voters can liquidate their shares if you cannot make a capital call.”
Many have called Robinhood’s claims she is busy democratizing the funding. Tenev consistently pushed the $ 35 billion figure as the total earnings for Robinhood’s users, which Rep. Jim Himes said, “You and anyone else who is studying finances knows it makes no sense without a rate of return.”
But while today’s session revealed a lot of hostility towards Tenif, it wasn’t all educational.
Despite President Maxine Waters’ warning that “this is not a political stage whatsoever,” there does not appear to be any coordinated sense of solutions to the epic circulation that fueled the GameStop (GME) meteoric rise at the end of January.
Real time solution?
Some of the proposals, including from Tenev himself, as well as from Davidson, were that the situation would not have evolved at all if the United States had stabilized trade in the day, and not two days later – called it T-0 instead of T-2. Tenif pointed out that “the current two-day period to settle trades exposes investors and the system to risks.”
Kenneth Griffin, CEO of Citadel, which he called “the largest market maker in the world,” questioned the possibility of a real-time system for trading securities in the next several years, saying, “The problem is that everything has to function perfectly.” He said that real-time trading “requires that every part of the workflow is perfectly synchronized across the parties”. Davidson disagreed, saying, “It’s clear in your business that the technology is in place for the commercial firms that do business in high-frequency trade.”
Davidson noted the potential role of the blockchain. The potential of security tokens to solve problems with middlemen and middlemen has been one of the long-promised benefits of the blockchain, although this is changing.
Waters confirmed that today’s session was just the beginning. She said that the committee aims to detain two other people with different witnesses.