Feb 19, 2021 06:45 UTC
Feb 19, 2021 at 06:45 UTC
Congress is blaming Robinhood, not Reddit
We did not learn a lot of new in today’s hearing, however the spotlight was undoubtedly on the gamified commerce app, instead of the traders on r/WallStreetBets.
Vlad Tenev, Robinhood’s chief executive officer, substantially occupied the new seat in today’s hearing before the House monetary Services Committee over January’s market volatility.
None of the representatives appeared significantly fascinated by golf stroke the screws to Reddit chief executive officer Steve Huffman, and lots of perceived to provide Keith Gill a similar props the remainder people did.
These aren’t the market manipulators you’re searching for
Gill, altogether fairness, was the foremost likeable character concerned, introducing his remarks by voice communication “A few things I’m not: I’m not a cat and that I am not Associate in Nursing authorized capitalist.” Gill, United Nations agency extremely started this chain of events by posting regarding his investment into GameStop in June 2019, even doubled down on his opinion that GME remains a decent purchase nowadays, at current costs. This is often despite the very fact that wild GME commerce has attracted criminal investigation.
That lack of scrutiny towards Gill and Huffman will a lot of to quell widespread concern that the events close explosive commerce in GameStop (GME) shares at the tip of Jan would start up probes into social media platforms’ role in potential market manipulation.
This is at the same time as the House just committee proclaimed nowadays additional hearings to scrutinize the largest players in social media. Reddit, for now, looks to possess flown below the measuring device.
Congressman Warren Davidson, United Nations agency sits on the committee, noted this rare space of agreement, telling Cointelegraph: “I was hopeful right out of the gate as a result of timely within the news cycle AOC was protruding up for the Reddit users, voice communication these folks ought to have a right to trade. Then Ted Cruz, on the opposite finish of the political spectrum same, ‘well, we agree.'”
Tenev’s business model
Though generally, Republicans were additional lenient than Democrats in addressing Robinhood’s activity, and particularly the firm’s polemic shut-off of shopping for however not commercialism of GME and different high-volatility stocks, everyone wished answers from Tenev.
The nature of Robinhood’s revenue model, that relies on the sale of order flow, whereas advertising itself as commission-free, fell below mass scrutiny, as did it’s dependence on a $3 billion injection of capital to fulfill collateral necessities.
“I believe a vulnerability was clearly exposed in your business model,” same congresswoman Anthony Gonzales whereas questioning Tenev. “We simply will’t sleep in a world wherever my constituents can have their shares liquidated if you can’t build a capital decision.”
Many known as out Robinhood’s claims to be busy democratizing finance. Tenev systematically pushed the figure of $35 billion as Robinhood users’ total gains, which Rep. Jim Himes same “you and anybody else educated in finance recognize is pointless while not a rate-of-return.”
But whereas today’s hearing discovered heaps of hostility towards Tenev, it wasn’t all that academic.
Despite presiding officer Maxine Waters’ admonition that “This isn’t political theater the least bit,” there didn’t appear to be any combined sense of solutions to the epic commerce that fueled GameStop’s (GME) meteoric rise at the tip of Jan.
Some proposals, as well as from Tenev himself, furthermore as Davidson, were that things wouldn’t have developed the least bit if the U.S. had commerce that settled the day of, instead of 2 days later — termed T-0 instead of T-2. Tenev noted “The existing 2-day amount to settle trades exposes investors and also the system to risk.”
Kenneth mythical creature, chief executive officer of stronghold, that he delineated as “the largest market maker within the world,” controversial the probability of a period of time system for securities commerce within the next many years, saying: “The issue is everything should work absolutely.” Period of time commerce, he said, “requires that each little bit of the work flow is absolutely synchronic across the parties.” Davidson disagreed, voice communication “Clearly in your business the technology exists for commerce companies that area unit engaged in high-frequency commerce.”
Davidson noted the potential role of blockchain. The potential of security tokens to unravel problems with intermediaries and brokers has been one in all the long-promised advantages of blockchain, tho’ that’s dynamical.
Today’s hearing was simply the start, presiding officer Waters Affirmed. She same the committee aimed to carry 2 additional with totally different witnesses.