Players central to the GameStop market bonanza will ask Congress to shorten the time needed to settle stock negotiations, according to depositions released before their appearances at a Congressional hearing on Thursday.
Why does it matter: A typically obscure part of stock trading is set to be among the forefront issues – while Robinhood and others seek to deflect the anger that resulted from the frenzy fueled by Reddit.
What they are saying: Billionaire Ken Griffin you will testify that there should be only one day between the time a trade is executed and its settlement – instead of the two business days it currently takes.
- Robinhood CEO Vlad Tenev will go further, asking for negotiations to be settled in real time.
- This would have allowed the company to “react better to periods of greater volatility in the markets without restricting the purchase of securities,” Tenev told lawmakers.
Flashback: Tenev said the huge jump in the amount of money needed to post while negotiations are settled has caused him to restrict trading on his platform – a move that has sparked anger among users and legislators.
Griffin, owner of Citadel Securities, will also defend the company’s extraordinary role in carrying out trades on the stock market made on Robinhood’s platform and elsewhere.
- “When others were unable or unwilling to handle the large volumes, Citadel Securities moved forward,” says Griffin.
- He will note that the company executed 7.4 billion shares at the height of the trading craze on behalf of retail investors in one day – more than the average daily volume for the entire stock market in 2019.
Of importance: Reddit CEO Steve Huffman, who is also expected to testify, will defend the / WallStreetBets – the community that served as ground zero for “meme stock” posts.
- Huffman says that the group’s activity “was well within normal parameters” and that the group was not infiltrated by bots, foreign agents or bad actors.
- Reddit trader Keith Gill will tell Congress that the idea of using social media to “promote GameStop shares to involuntary investors is absurd”.
Gabe Plotkin, CEO of Melvin Capital – a hedge fund aimed at r / WallStreetBets for its short position on GameStop – will say he was “personally humiliated” by the efforts that raised the stock price, while emphasizing targeted anti-Semitic language to him.
- For his testimony, Melvin closed his GameStop after six years last month. He received a cash injection from the hedge fund Citadel (and Point72) led by Griffin, after suffering heavy losses.
Jennifer Schulp, a former employee of the financial regulator FINRA, will testify that the wild trade “has not posed a systemic risk to 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 to be unnecessary “in view of the minimal impact on the functioning of the market”.
Go deeper: Read their testimonials …