Players at the heart of the GameStop market bonanza are appealing to Congress to shorten the time required for stock trading, according to testimonies unveiled during a congressional hearing on Thursday.
Why it matters: A typically obscure part of stock trading is at the forefront – as Robinhood and others want to divert the anger that stems from the Reddit-driven stock delusion.
What they say: Billionaire Ken Griffin will testify that there should be only one day between the execution of a transaction and its completion – rather than the two business days it currently takes.
- Robinhood CEO Vlad Tenev will go further and appeal to real-time trading.
- This would have enabled the company to ‘respond better to periods of increased volatility in the markets without restricting the purchase of securities’, Tenev claims lawmakers.
Flash back: Tenev said that the sharp increase in the amount of cash needed to record while the transactions were completed, led to the trading being stalled on its platform – a step that angered users and legislators has.
Griffin, who owns Citadel Securities, will also defend the company’s extraordinary role in conducting the stock market trading on Robinhood’s platform and elsewhere.
- “When others could not or did not want to handle the heavy volumes, Citadel Securities increased,” Griffin will say.
- He will note that the company executed 7.4 billion shares at the height of the trading mania on behalf of retail investors in one day – more than the average daily volume for the entire stock market in 2019.
Remarkable: Reddit CEO Steve Huffman, who also plans to testify, will defend r / WallStreetBets – the community that served as ground-zero for ‘meme stock’ posts.
- According to Huffman, group activities were ‘within normal parameters’, and the group was not invaded by clashes, foreign agents or bad actors.
- Reddit trader Keith Gill will tell Congress that the idea of using social media to ‘promote GameStop shares among unconscious investors’ is ridiculous. ‘
Gabe Plotkin, CEO of Melvin Capital – a hedge fund targeting r / WallStreetBets for his short position in GameStop – will say that he was ‘personally humble’ about the efforts to raise the share price, while using the anti-Semitic language that directed him, emphasized.
- According to his testimony, Melvin shut down the GameStop last month shortly after six years. It received a cash infusion from hedge fund Citadel (and Point72) led by Griffin, after suffering heavy losses.
Jennifer Schulp, a former official of financial regulator FINRA, will testify that wild trade ‘does not pose a systemic risk to the functioning of our markets.’
- Schulp, who is currently at the Cato Institute, would also say that changes in regulations in response to the episode are likely to be unnecessary “given the minimal impact on market function.”
Go deeper: Read their testimonies …