Sen. Elizabeth Warren, D-Mass.
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Senator Elizabeth Warren (D-Mass.) Is lobbying Citadel CEO Ken Griffin about the financial giant’s relationship with Robinhood, how Citadel benefits from their relationship and how to protect retail investors.
In a letter sent on Thursday, Warren said he is particularly interested in the potential conflict of interest between the Citadel hedge fund side, which invested $ 2 billion in short selling firm Melvin Capital for its losses with GameStop, and Citadel Securities, a “pay-as-you-go” practitioner for Robinhood.
“Both Robinhood and Citadel denied that Citadel had any role in this decision – but Congress and the public deserve clarity about the process and the reasons for these Robinhood decisions, which have had a significant impact on many individual investors,” said Warren in a letter. six pages.
Warren also asked Griffin about the controversial but legal way in which Robinhood and other brokers make money through negotiations, despite the reduction in commissions: payment for order flow. Robinhood and other brokers are major beneficiaries of this revenue model and receive payments from market makers like Citadel Securities.
“The payment request flow model raises questions about inherent conflicts of interest and whether brokers like Robinhood and market makers like Citadel Securities profit from fast trades and market turnover that is unrelated to the underlying stock values of the company that are being traded or the profits of individual investors: instead, it is a business practice in which ‘Source