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Citadel and Robinhood CEOs to call for new stock trading rule at GameStop hearing

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Gamers at the heart of the GameStop marketplace will ask Congress to shorten the time it takes for stock transactions to settle, says testimonials released before they appeared at a Congressional hearing Thursday.

Why is this important: A generally obscure part of stock trading is expected to be among the issues to the fore as Robinhood and others seek to deflect the anger that has been stemming from the stock market frenzy fueled by Reddit.

What they say: Billionaire Ken Griffin will testify that there should be only one day between when a trade is executed and when it is settled rather than the two business days it currently takes.

  • Robinhood CEO Vlad Tenev will go further by requesting that transactions be settled in real time.
  • This would have enabled the company “to respond better to periods of heightened market volatility without restricting the purchase of securities,” Tenev will claim to lawmakers.

Go back: Tenev said the sharp increase in the amount of money required to post during trade settlement has caused it to slow down trading on its platform, which has angered users and lawmakers alike.

Griffin, which owns Citadel Securities, will also defend the disproportionate role of the company in carrying out stock market transactions carried out on the Robinhood platform and elsewhere.

  • “When others were unable or unwilling to handle the large volumes, Citadel Securities stepped up its efforts,” Griffin said.
  • He will note that the company executed 7.4 billion shares at the height of the trading craze on behalf of retail investors in one day more than the average daily volume for the entire equity market in 2019.

To note: Reddit CEO Steve Huffman, who is also ready to testify, will be defending the r / WallStreetBets community that served as the starting point for the “same stock” posts.

  • Huffman says the group’s activity “was well within normal parameters” and the group was not infiltrated by robots, foreign agents, or bad actors.
  • Reddit trader Keith Gill will tell Congress that the idea that he used social media to “promote GameStop action to unwitting investors is absurd.”

Gabe Plotkin, CEO of Melvin Capital, a hedge fund targeted at r / WallStreetBets for its short position on GameStop, will say he is “personally humbled” by the efforts that have driven up the share price, while insisting on anti-Semitic language directed at respect.

  • According to his testimony, Melvin closed his GameStop shortly after six years last month. He received a cash injection from the hedge fund run by Griffin Citadel (and Point72) after suffering heavy losses.

Jennifer schulp, former official of the financial regulator FINRA, will testify that wild trading “did not present a systemic risk for the functioning of our markets”.

  • Schulp, who currently works at the Cato Institute, will also say that regulatory changes in response to the episode are likely unnecessary “in light of the minimal impact on market function.”

Go further: Read their testimonials …

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