Robinhood CEO Says Allegations That Trading Restrictions Were Meant to Help Hedge Funds Are…

by akoloy

Robinhood CEO Vladimir Tenev mentioned in testimony earlier than the House Financial Services Committee on Thursday that any allegations his buying and selling app tried to assist hedge funds by limiting trades on unstable shares final month is fake.

Tenev started his testimony earlier than the committee at round midday ET on Thursday, by saying that Robinhood sought to “democratize investing” and make it simpler for retail buyers to achieve entry to inventory markets.

Committee chairwoman Maxine Waters (D-Calif.) requested Tenev to expound on what occurred on Jan. 28, the day that Robinhood blocked buying and selling of GameStop inventory amid a frenzied buying and selling rally.

Tenev instructed the panel that the net dealer, one of the standard venues within the latest retail-trading mania, put momentary shopping for restrictions on GameStop and a variety of different securities as clearing house-mandated deposit necessities for equities elevated ten-fold.

“Robinhood put the restriction in place in an effort to meet increased regulatory deposit requirements, not to help hedge funds,” Tenev instructed the panel.

“We don’t answer to hedge funds. We serve the millions of small investors who use our platform every day to invest,” he added.

In ready remarks forward of his testimony, Tenev insisted there was no foundation to claims that Robinhood imposed the buying and selling caps in an effort to drawback smaller buyers.

“Any allegation that Robinhood acted to help hedge funds or other special interests to the detriment of our customers is absolutely false and market-distorting rhetoric,” Tenev mentioned in written testimony.

Still, he apologized to Robinhood clients.

“Despite the unprecedented market conditions in January, at the end of the day, what happened is unacceptable to us. To our customers, I apologize, and please know we are doing everything we can to make sure this can’t happen again,” he mentioned.

Tenev mentioned in his testimony that his platform has raised extra capital to function a buffer towards future turbulence just like the unusually excessive, rally-fueled deposit request that was made by clearing homes, which assist settle transactions on platforms like his.

“Robinhood immediately secured additional funds—altogether through capital raising and other measures, we’ve increased our liquidity by more than $3 billion, to cushion ourselves against increased collateral requirements and related market stress in the future,” he mentioned.

Besides Tenev, others to face a grilling earlier than the panel embody Wall Street hedge fund managers, the chief govt of Reddit, and a YouTube streamer often called Roaring Kitty.

Waters has made it clear hedge funds are in her crosshairs, in January blaming their “unethical conduct” for the volatility.

“Many retail investors appeared motivated by beating Wall Street at its own game,” she mentioned on the listening to opening. “There are many whose beliefs [sic] the system is rigged against them has been enforced.”

In ready testimony revealed on Wednesday, the witnesses typically acknowledged the GameStop saga was unprecedented, however all of them mentioned there was no foul play on their half.

“Reddit users attempting to take down a hedge fund, that’s an extraordinary thing. … This is a break from history,” Representative Patrick McHenry, the senior Republican on the House panel, instructed reporters earlier than the listening to. “Congress has to do a lot more work to understand the nature of what occurred.”

The Reddit rally drove large volatility in GameStop and different shares, prompting clearing homes to name for billions of {dollars} in additional collateral from Robinhood and different retail buying and selling platforms.

Besides Robinhood, different platforms additionally suspended shopping for within the affected shares on Jan. 28.

Lawmakers from each events had been outraged and questioned if the buying and selling platforms had been siding with hedge funds over small retail buyers.

Reuters contributed to this report.

From The Epoch Times

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