I wanted to ask some questions to Mr. Griffin. Thank you very much. Now, before we begin with your oral testimonies I would like to swear in the witnesses. Mr. Kenneth Griffin: (03:31:05) Each of you will have five minutes to summarize your testimony-. So I want to talk about the high-frequency trading. Now some on the left are already floating new restrictions or things to protect these so-called uninformed retail investors, who in their eyes don’t know the difference between a [inaudible 00:05:26] point and the Dow Jones without Congress telling them. As for what happened in January, others will have to explain it. But between the 1.4 billion and the roughly 700 million, there was a discussion between our operational team at Robinhood Securities and the relevant counterparts at NSCC regarding what measures we intend to take to lower the risk of our portfolio. Thank you, Congresswoman. Thank you. Is it your testimony, after Robinhood paid the SEC 65 million to settle those charges that this conflict of interest is in your customers’ best interest? Just seems to be a trend in Washington, DC to never let a crisis go to waste. I don’t believe we had made any decisions on PCOing the stocks between the initial three billion request and the subsequent 1.4 billion request. The stock market is a powerful wealth creator but more than half of US households participate in it. Thank you for the opportunity to take part in today’s hearing. The second is that dark pools are often willing to engage in business practices where they discriminate against one class of investors versus another. But why- [crosstalk 00:53:15], Vlad Tenev : (53:16) It’s because it’s good for customers. It is just Melvin’s view about whether it will. In 2020, Robinhood provided our customers in excess of $1 billion in price improvement. Mr. Vlad Tenev: (01:49:09) Mr. Kenneth Griffin: (03:07:23) Congressman, that’s right. And I want to, if I can, just tie a couple of threads together that I think are relevant that have been… we’ve had corners of. Vlad Tenev: (04:08:57) Thank you so much. In particular, having worked on these policy issues with members of the Fed in various contexts, we don’t have to make payroll on Friday. Why? We need facts, not just the salacious bits or nasty comments on Reddit, and look, there’s plenty of that. Now, I really care about a level playing field for retail investors to access the market. However, is it a good outcome for millions of Americans to flood into trading apps that could be required to share user data to parent companies that have ties to the CCP? Thank you, madam chairperson, and thank you to the witnesses. I should take that as a no. I do not have clients, and I do not provide personalized investment advice for fees or commissions. Rep. Timmons: (04:16:06) I don’t want the panel to think that when we work so hard on stimulus dollars that that happened, that people were running out to invest their money. Rep. Casten: (04:07:04) 2012 … Pardon me. Is that correct? Jennifer Schulp: (04:49:00) We need the facts today. Now Wall Street was losing billions of dollars. Keith Gill: (40:59) Brad Sherman: (13:07) You’re referring to Mr. Kearns? So, this tax to me would discourage risky and high-frequency trading, unfair high-frequency trading. Mr. Huffman, you are now recognized for five minutes to present your oral testimony. Brad Sherman: (11:58) Mr. Keith Gill: (02:23:51) Are there any other kinds of Reddit, or other kinds of platforms that you talked about the stock? I think ultimately, I’m not sure kind of how the momentum built around that. [inaudible 01:56:52]. I’ll go back to Mr. Tenev on the regulatory requirements. Is payment for order flow legal? I’m super appreciative of the leadership of our chairwoman, at least having some sort of transparency on exactly what happened. PITTSBURGH, Jan. 26, 2021 /PRNewswire/ -- "I thought there could be a better tool to make uniform designs when creating jewelry, sculptures or ⦠Citadel is now involved in another short-selling problem, and Robinhood routes half of its customers’ orders to you. Maxine Waters: (01:39) Mr. Vlad Tenev: (03:20:07) I regret that you really haven’t addressed the question, and so I guess I would ask is a separate one, which is, would you commit here to offering in a higher in-app threshold, including, but not limited to, financial education before allowing people to purchase options? Maxine Waters: (10:34) And you didn’t include any language or disclosures regarding your capital requirements. When did you start offering options on your platform? I’m personally humbled by what happened in January. Rep. Ed Perlmutter: (02:21:59) Congresswoman, I appreciate that question. Can you talk a little bit more about that? Then subsequent, we issued odd communications and communications on social media explaining the reason being enhanced deposit requirements due to high volatility. If a company is valued by the market differently than a review of its fundamentals suggests, it might indicate that the analysis is missing relevant information about a company’s prospects, or it might indicate that the company’s stock price is due for a correction. One important one is that our model in formula for payment for order flow works a little bit differently. Gabriel Plotkin: (27:58) … and collateral requirements. On Reddit, I think the investment advice is actually probably among the best because it has to be accepted by many thousands of people before getting that foot of visibility. Addictive trading means more trading, and more trading means more money for Robinhood. [crosstalk 03:24:32]. Tom Emmer: (04:39:10) Clearly there is a manipulation and distrust within the system and inequality in American financing. This has been a big win for American investors. Congressman, I’ve been following GameStop for a number of years. Despite the unprecedented market conditions in January, at the end of the day, what happened is unacceptable to us. In your analysis, when you started into the short position, what did you think the stock was worth? The SEC has those to pause activities that could be harmful not only to the markets, but to the individual investors. Absolutely Congressman. Rep. Casten: (04:09:03) They make a lot of money. That’s correct. Thank you. Mr. Kenneth Griffin: (03:33:57) Is that true? I hope we’ll continue to look at that. Is that correct? I’m really… I’m just looking for… We’re tight on time. Vlad Tenev: (01:31:43) I do. And I think it’s worth looking at that, because as much as we’re celebrating Mr. Gill here, we’re not talking very much about Mr. Salvador Vergara, who was featured in a Wall Street Journal story, who took out a $20,000 personal loan through Robinhood, invested it in GameStop, only to see the value of his position go down 80%. We had no idea what Friday would have looked like had we been able to allow customers to buy these securities unrestricted on Thursday. It drives down the cost of capital. Would you see that as an area ripe for regulatory adjustment, or do you think that that’s not a problem? So to give you a sense for the increase, our capital requirements… Our deposit requirements with NSCC from January 25th to January 28th, so a span of three days, increased tenfold. Importantly, investing in the stock market also provides a path to wealth for individual investors, but stock ownership traditionally has been skewed towards the already wealthy, and it is highly correlated with race, education, and age. The idea is the same tools that institutions and wealthier, high-net-worth individuals have had for a long time should be available to the people regardless of their net worth or how much money they have. Now Robinhood routes to market makers, including Citadel Execution Services. Mr. Tenev, you are recognized for five minutes to present your oral testimony. Thank you very much. And then, you were also cut off earlier when answering my colleague, Miss Beatty’s question regarding the difference between payment for order flow for the options market versus the equities market. Something like WallStreetBets would not exist if users had to reveal their full identity because in WallStreetBets, people are revealing gains and losses. Last month, of course, as we saw this volatility with GameStop, and AMC, and the stock started to rally, everybody seemed to get involved. Congressman, that is a terrific question. As the facts that I know now, it does appear to have worked the way it was supposed to. Gabriel Plotkin: (04:52:37) These events have illuminated potential conflicts of interest and the predatory ways that certain funds operate, and they have demonstrated the enormous potential power of social media in our markets. Next, we will have Ms. Axne for five minutes. Thank you, madam chairwoman. So I’m not sure kind of how it started, but I think ultimately, they saw an opportunity with a very high short interest stock that a lot of people could relate to because it was a retail experience. I want to thank and welcome the panelists to is this great forum. I don’t actually understand the premise of the question. Six months after that, December ’20, Robinhood paid pay the $65 million fine to the SEC for, among other things, failing to disclose payment for order flow agreements to your customers. We started at T+5. I want to thank you and the Ranking Member for convening today’s hearing. At that point, 5:11 AM, did you have the liquidity to meet the additional $3 billion deposit requirement? Okay. We always felt comfortable with our liquidity, and the additional capital that Robinhood raised-, Rep. Maxine Waters: (47:43) How can that be monetized such that the market maker profits greatly if I’m doing it [crosstalk 01:52:13]? Some of it was premise on options. We’re expanding that as fast as we can. How can market makers offer that better pricing to Mr. Sherman’s quick line of questions? Here, you almost have the opposite. Rep. Juan Vargas: (03:07:33) There’s several reasons that may be the case. Vlad Tenev : (47:47) It was stated earlier that that may not be the case. Thank you, Madam Chair. But didn’t the fact that you went out, raised more capital so that you could actually answer this problem in the future, doesn’t that also belie that you were under-capitalized on the 28th of January? Of you said that Rule 606 reports detail the arrangements you have with firms like Citadel. Maxine Waters: (22:16) Rep. Auchincloss: (05:14:39) Importantly, the temporary volatility in these stocks did not present a systemic risk to market function. I’m going to take that as a yes since you said they go further. Okay. What’s the deal there? [inaudible 04:11:19] my time. Several others have mentioned Chinese-based brokerages, other brokerages that are essentially offering similar products, all having to comply with these regulations. Once they all got to the parking lot and realized what happened that’s when they started to call 911,” said Katie Hicks. During that time, the brokerage firm, the DTCC, and the brokerage firm on the other side can remain at risk of that stock not actually clearing and the collateral requirements are in place in order to mitigate [inaudible 01:07:19] and mitigate the risk that the brokerage firm will not be able to make good on its promises to sell or buy. Some have even spread conspiracy theories and alleged that crimes were committed before knowing what even happened. Rep. Carolyn Maloney: (57:20) Would a securities transaction tax be beneficial to retail investors in the United States? Our nation’s ability to allocate capital to its best and highest use creates jobs, drives innovation and fuels our economy. Mr. Vlad Tenev: (02:01:16) Thank you. In fact, 50% of American families own no stock at all. Thank you. I have no further questions, Madam Chair. Among other things, these rules prohibit hate, harassment, bullying and illegal activity on Reddit and they are enforced by Reddit’s anti-evil team which is composed of engineers, data scientists, and other specialists. Thank you. Rep. Joyce Beatty: (02:57:46) I’m just an individual whose investment in GameStop and posts on social media were based upon my own research and analysis. Can you talk a little more about what Robinhood is doing to push innovation forward and create a level playing field for all investors while at the same time making sure that those investors are well-informed? Rep. Ed Perlmutter: (02:21:19) As a result, the gaming industry had its best year ever but GameStop had significant losses. That did occur and we are always [crosstalk 05:18:38] markets. Rep. Casten: (04:08:38) Rep. Blaine Luetkemeyer: (01:35:55) That’s pretty significant. Thank you, Congressman. Thank you very much. Rep. Trey Hollingsworth: (03:32:34) Steve Huffman: (34:43) Rep. Vincente Gonzalez: (03:29:27) Prices were moving dramatically day to day, even hour to hour. One of the assertions that you’ve heard already today is that investing is ‘casino gambling’, it’s using monopoly funny money. Thank you all, and look forward to getting to the facts on the matter today. What did the users know, and when did they know it? It is tragic that some people lost money, and my heart goes out to them. Will you make sure that you get those over to our committee? And even if you stipulate that there has been a cost savings, it’s unclear to me how much of that cost savings is being passed onto the retail investors and how much of that cost savings is actually being pocketed by Robinhood as profit. Ms. Tlaib, you’re recognized for five minutes. Rep. Al Green: (01:55:14) Let me ask you this, then. Thank you, Congressman Casten. Thank you, Madame Chair. Sorry, Mr. Tenev, I just don’t have a lot of time. Rep. Steve Stivers: (01:46:37) This is evidenced by your recent decision to raise those requirements. Thank you very much. Chairlady Waters: (01:50:53) Rep. Carolyn Maloney: (01:01:14) Rep. Tlaib: (04:57:53) Rep. Barry Loudermilk: (02:36:46) It’s set up in a way that helps only the wealthy. John Rose: (03:54:53) If I can direct my first question to Mr. Gabe Plotkin at Melvin Capital Management. When our research convinces us that a company will grow relative to expectations, we make a long-term investment. And while institutional investors can afford to run their own tests, and they do, and I’m sure Mr. Griffin normally is quite often on the receiving end of those tests and trying to measure up to his competitors to compete for market share there, the institutional investors have the market power to demand best execution statistics for their prime brokers.
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