- Robinhood CEO Vlad Tenev mentioned the belongings of his platform’s customers have collectively grown by greater than $35 billion.
- Tenev was challenged on this level by lawmakers, who requested how that will evaluate if customers invested their cash otherwise.
- The CEO on Thursday defended the platform he based in 2013 from lawmakers in a five-hour congressional listening to.
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Robinhood Markets CEO Vlad Tenev mentioned in his testimony earlier than Congress this week that the belongings of his platform’s customers have collectively grown by greater than $35 billion.
Tenev on Thursday defended the platform he based in 2013 from lawmakers throughout the five-hour listening to in entrance of the Home Monetary Providers Committee. It was the primary of three deliberate hearings, which purpose to analyze the primary gamers on the middle of the GameStop drama in January.
Rep. Jim Himes, a former Goldman Sachs banker, was not so satisfied with Tenev’s declare. He argued that if Robinhood wouldn’t reveal how a lot its purchasers invested on the buying and selling platform, then it will not be attainable to calculate the return on their investments.
“You threw out the variety of $35 billion,” Himes mentioned. “I truly suppose the fitting comparability is: What in case your purchasers had merely invested in an S&P 500 index fund? Would that quantity be greater than $35 billion, or much less?”
However Tenev mentioned that the consultant was making the fallacious comparability.
“Congressman, with respect, I do not suppose the fitting comparability is investing in an S&P 500 index fund,” the Robinhood CEO mentioned. “I feel the fitting comparability shouldn’t be having invested in any respect and having as a substitute spent that cash.”
When pressed, this time, by Rep. David Kustoff, on the corporate’s controversial fee for order circulation mannequin, whereby prospects’ trades are directed to 3rd events for execution, Tenev admitted that it was certainly Robinhood’s largest income.
Rep. Maxine Waters adopted up with the identical query on whether or not whose finest curiosity it was that Robinhood was promoting prospects’ trades, which Tenev largely averted. Robinhood in December paid a $65 million penalty in December 2020 for “deceptive” communications with prospects round its fee for order circulation practices.
The listening to scrutinized occasions that occurred in January, when day merchants organizing on Reddit drove up the share value of GameStop, initiating a “short-squeeze” on hedge funds that had been betting towards the online game retailer.
The inventory went on a dizzying climb, just for it to return crashing again down following restrictions on the inventory by Robinhood and different brokerages. The episode has drawn the eye of the Securities and Change Fee and different regulators.
Others summoned to Washington to testify included Citadel chief govt Ken Griffin, Melvin Capital hedge-fund supervisor Gabe Plotkin, and Keith Gill, often known as Roaring Kitty, amongst others. Nevertheless, many of the consideration was directed at Tenev, who acquired intense questioning primarily concerning Robinhood’s enterprise mannequin.
Representatives blamed Robinhood for failing to guard retail buyers. Some questioned whether or not the commission-free characteristic ranges the taking part in area or results in unsound market practices.
“There’s an innate stress in your small business mannequin between democratizing finance, which is a noble calling, and being a conduit to feed fish to sharks,” Rep. Sean Casten mentioned.
Representatives from each events agreed that brief promoting needs to be extra tightly regulated, or at the very least extra clear.
“If we have realized something from the previous few weeks, it is that these common, on a regular basis buyers are fairly darn refined,” Mr. McHenry mentioned.