Central players on the GameStop market bonanza will ask Congress to shorten the time required for stock transactions, according to testimonies published before their appearances at a congressional meeting on Thursday.
Why does it matter: A normally obscure part of stock trading will be among the issues at the forefront – as Robinhood and others seek to deflect the anger that has emerged from the frenzy of Reddit-fueled stocks.
What are they saying: Billionaire Ken Griffin will testify that there should be only one day between the time a transaction is executed and the time it is settled – rather than the two business days it currently takes.
- CEO at Robinhood Vlad Tenev will go further, demanding the establishment of transactions in real time.
- This would have allowed the company to “react better to periods of high market volatility without restricting the purchase of securities,” Tenev will tell lawmakers.
Flashback: Tenev said the sudden rise in the amount of cash needed to post while transactions are set has made it limit trading on its platform – a move that has angered users and lawmakers.
Griffin, who owns Citadel Securities, will also defend the excessive role of the company in conducting transactions on the stock market conducted on the Robinhood platform and elsewhere.
- “When others couldn’t or didn’t want to deal with the heavy volumes, Citadel Securities stepped up,” Griffin said.
- He will note that the company executed 7.4 billion shares to live up to the rage of trading on behalf of retail investors in one day – more than the average daily volume for the entire stock market in 2019.
Of note: Reddit CEO Steve Huffman, who is due to testify, will defend r / WallStreetBets – the community that served as a zero for stock memes.
- Huffman says the group’s work “was within normal parameters,” and the group was not infiltrated by robots, foreign agents or bad actors.
- Reddit marketer Keith Gill will tell Congress that the idea he used on social media to “promote GameStop’s actions to involuntary investors is absurd.”
Without Plotkin, CEO of Melvin Capital – a speculative fund targeted by r / WallStreetBets for his short position in GameStop – will say that he was “personally humiliated” by the efforts that led to rising stock prices, while emphasizing the anti-Semitic language directed at him.
- According to his testimony, Melvin closed his GameStop shortly after six years last month. He received a cash infusion from the hedge fund led by Griffin Citadel (and Point72) after suffering heavy losses.
Jennifer Schulp, a former official at the financial regulator FINRA, will testify that the wild transaction “did not present a systemic risk for the functioning of our markets”.
- Schulp, who is currently at the Cato Institute, will also say that regulatory changes in response to the episode are likely unnecessary “in light of the minimal impact on market function.”
Go deeper: Read their testimonies …