United States lawmakers are set to grill Robinhood CEO Vlad Tenev over the GameStop trading frenzy at a Congressional hearing later today.
In his prepared remarks, Robinhood CEO appeared to place responsibility for the platform’s stock trading suspensions on the U.S. Securities and Exchange Commission. Tenev said that the company blocked trading to meet “regulatory deposit requirements” defined by the SEC. The exec specifically criticized an SEC rule that requires equities transactions to clear over two days:
“It takes several days for the clearinghouse to process the transaction [...] This is known as “T+2” settlement, denoting the trade date plus a two-day ‘settlement period.’ This T+2 settlement cycle is codified by SEC Rule 15c6-1(a), which prohibits broker-dealers from effecting the purchase or sale of a security later than the second business day after the execution of the trade.”
Tenev called on the authority to modify its trading rules to allow clearinghouses to support real-time settlement instead of a two-day settlement period. “There is no reason why the greatest financial system the world has ever seen cannot settle trades in real time. Doing so would greatly mitigate the risk that such processing poses,” he wrote. Robinhood previously released a blog post excoriating two-day settlement on Feb. 2.
In his testimony, Tenev also referred to a Jan. 30 investor alert by the SEC that made it clear that broker-dealers had the right to reject or limit customer transactions for “legal, compliance, or risk management reasons.”
Tenev also denied reports that Robinhood blocked trading at the request of hedge funds, stating that any allegation that Robinhood acted to help hedge funds or other interests to the detriment of their customers is “absolutely false and market-distorting rhetoric.”
Robinhood’s GameStop saga started on Jan. 28 when the company halted buying for GameStop stock and some other shares that were allegedly pumped through the r/Wallstreetbets Reddit community. Following trade restrictions, the community speculated that Robinhood could have acted to protect the interests of hedge funds like Citadel and Melvin Capital at the expense of retail investors on Reddit.
House Representative Maxine Waters (D-CA) announced plans to hold a virtual hearing devoted to the GameStop saga in early February. The hearing is scheduled for 12:00 PM ET and will also feature Reddit CEO Steve Huffman, Melvin Capital CEO Gabriel Plotkin and Citadel CEO Kenneth Griffin.