Sen Elizabeth Elizabeth, D-Mass.
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Sen. Elizabeth Warren (D-Mass.) Expresses Ken Griffin, CEO of Citadel, under pressure over the financial giant’s relationship with Robinhood, how Citadel benefits from their relationship and how to protect retail investors.
In a letter sent Thursday, Warren said she was particularly interested in the possible conflict of interest between Citadel’s hedge fund side, which had invested $ 2 billion in short-selling firm Melvin Capital for its GameStop losses, and Citadel Securities, ‘ a practitioner of “payment for order flow” for Robinhood.
“Both Robinhood and Citadel have denied that Citadel had any role in this decision – but Congress and the public deserve clarity on the process of and reasons for these decisions by Robinhood, which have had a significant impact on many individual investors,” said Warren in a statement. six page letter.
Warren also asked Griffin about the controversial yet legitimate way Robinhood and other brokers make money by trading, despite reducing commissions: paying for order flows. Robinhood and other brokers are major beneficiaries of this revenue model and receive payments from market makers such as Citadel Securities.
The payment for order flow model raises questions about inherent conflicts of interest and whether brokers such as Robinhood and market makers such as Citadel Securities benefit from rapid trading and market acceleration unrelated to the underlying values of the shares being traded or the gains of individual investors: it is rather a business practice in which ‘Source