- Robinhood CEO Vlad Tenev acknowledged the resources of his platform’s users have collectively grown by more than $35 billion.
- Tenev was challenged on this point by lawmakers, who asked how that will perhaps maybe examine if users invested their money differently.
- The CEO on Thursday defended the platform he primarily based in 2013 from lawmakers in a five-hour congressional hearing.
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Robinhood Markets CEO Vlad Tenev acknowledged in his testimony sooner than Congress this week that the resources of his platform’s users have collectively grown by more than $35 billion.
Tenev on Thursday defended the platform he primarily based in 2013 from lawmakers during the five-hour hearing in front of the Home Financial Companies Committee. It was the first of three deliberate hearings, which function to investigate the main gamers at the center of the GameStop drama in January.
Regain. Jim Himes, a traditional Goldman Sachs banker, was no longer so convinced with Tenev’s explain. He argued that if Robinhood wouldn’t point to how grand its purchasers invested on the trading platform, then it wouldn’t be that you might maybe be also think of to calculate the return on their investments.
“You threw out the selection of $35 billion,” Himes acknowledged. “I in truth think the simply comparison is: What if your purchasers had simply invested in an S&P 500 index fund? Would that number be more than $35 billion, or much less?”
But Tenev acknowledged that the representative was making the wrong comparison.
“Congressman, with respect, I don’t think the simply comparison is investing in an S&P 500 index fund,” the Robinhood CEO acknowledged. “I think the simply comparison is no longer having invested at all and having instead spent that money.”
When pressed, this time, by Regain. David Kustoff, on the firm’s controversial price for expose circulation mannequin, wherein customers’ trades are directed to 3rd occasions for execution, Tenev admitted that it was indeed Robinhood’s greatest income.
Regain. Maxine Waters adopted up with the similar question on whether whose most efficient interest it was that Robinhood was selling customers’ trades, which Tenev mostly evaded. Robinhood in December paid a $65 million penalty in December 2020 for “misleading” communications with customers round its price for expose circulation practices.
The hearing scrutinized occasions that took location in January, when day merchants organizing on Reddit drove up the section label of GameStop, initiating a “instant-squeeze” on hedge funds that had been betting against the video sport retailer.
The stock went on a dizzying climb, only for it to attain crashing abet down following restrictions on the stock by Robinhood and other brokerages. The episode has drawn the attention of the Securities and Alternate Commission and other regulators.
Others summoned to Washington to testify included Citadel chief govt Ken Griffin, Melvin Capital hedge-fund manager Gabe Plotkin, and Keith Gill, additionally is named Roaring Kitty, among others. Then again, most of the attention was directed at Tenev, who received intense questioning mainly regarding Robinhood’s business mannequin.
Representatives blamed Robinhood for failing to guard retail investors. Some questioned whether the commission-free characteristic ranges the playing enviornment or ends in unsound market practices.
“There is an innate tension in your business mannequin between democratizing finance, which is a noble calling, and being a conduit to feed fish to sharks,” Regain. Sean Casten acknowledged.
Representatives from both occasions agreed that instant selling ought to be more tightly regulated, or at the least more clear.
“If we have learned anything from the previous few weeks, or no longer it is that these reasonable, day after day investors are somewhat darn subtle,” Mr. McHenry acknowledged.