{"id":2608,"date":"2021-02-28T18:03:51","date_gmt":"2021-02-28T23:03:51","guid":{"rendered":"http:\/\/blogs.shu.edu\/stillmanexchange\/?p=2608"},"modified":"2021-02-28T18:03:51","modified_gmt":"2021-02-28T23:03:51","slug":"robinhood-and-citadel-ceos-face-questionings-from-lawmakers","status":"publish","type":"post","link":"https:\/\/blogs.shu.edu\/stillmanexchange\/2021\/02\/28\/robinhood-and-citadel-ceos-face-questionings-from-lawmakers\/","title":{"rendered":"Robinhood and Citadel CEOs Face Questionings from Lawmakers"},"content":{"rendered":"

Alyssa Mar<\/strong>
\nTrending Writer<\/strong><\/em><\/p>\n

Last Friday, the House Committee of Financial Services called upon Robinhood and Citadel CEOs Vlad Tenev and Ken Griffin to testify before Congress for restricting trading of GameStop stock on the Robinhood app.<\/p>\n

\"\"
Robinhood and Citadel CEOs faced intense questioning from lawmakers last Friday (Photo courtesy of CNBC)<\/em><\/strong><\/figcaption><\/figure>\n

Following the immense stock price surge of GameStop stock fueled by \u201camateur\u201d traders on an infamous Reddit subforum, WallStreetBets, the zero-fee trading firm was criticized for its action to halt further purchases of GameStop on its platform. Branded by their mission to \u201cdemocratize finance for all\u201d and believing that \u201ceveryone should have access to the financial markets,\u201d the company faced major backlash on their attempt for market regulation and hypocrisy. Not only that, over 90 investors have filed federal lawsuits claiming that the app\u2019s actions were \u201cunlawful and unfair,\u201d according to CNBC news. In response to the alleged accusations, Tenev apologized for his firm\u2019s actions stating, \u201cTo our customers, I\u2019m sorry, and I apologize. Please know that we are doing everything we can to make sure this won\u2019t happen again.\u201d<\/p>\n

Despite apologizing for the firm\u2019s restriction of trading volatile \u201cmeme stocks,\u201d Tenev continued to defend Robinhood\u2019s business model of payment for order flow (PFOF). PFOF is a type of algorithmic flow in which, instead of sending one\u2019s market order into the exchange, the broker sends the customer\u2019s trading data (order flow) to a high-frequency trading firm (in this case, Citadel). The high-frequency firm then purchases the shares right before the customer and then sells them back to the customer for a fractional difference. In perspective, every time that Robinhood sells customer data to Citadel, they profit off of the difference, allowing for the ability of no-commission trades. According to CNBC, both Tenev and Griffin have stated that this also allows for \u201cinnovation in the industry.\u201d<\/p>\n

During the hearing, lawmakers also took it as an opportunity to dig deeper into Citadel controversies about whether to allow taxation for financial transactions. Griffin and Congresswoman Rashida Tlaib battled it out for a right answer in this fiery argument. According to CNN, Griffin states, \u201cWe firmly believe a financial transaction tax would injure Americans trying to save for retirement.\u201d In response, Tlaib attacked with, \u201cLet\u2019s not gaslight the American people. Y\u2019all will be fine with the tax \u2026 our folks are tired of bailing you all out when you screw up.\u201d<\/p>\n

After the hearing, Tenev admitted to \u201calways improving,\u201d following with \u201cWe\u2019re not going to be perfect. And we want to improve and make sure we don\u2019t make the same mistakes twice.\u201d As controversial as a firm that Robinhood is, Robinhood is continuing to democratize the trading area, despite all of the holdbacks.<\/p>\n

 <\/p>\n

Contact Alyssa at alyssa.mar@student.shu.edu<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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