Lawmakers grilled main executives along with a Reddit user who goes by the moniker"DeepF***ingValue" during a hearing Thursday that led to unearth more about the GameStop stock market mania that delivered Wall Street reeling late a month.
The hearing came after an unprecedented series of occasions upended financial markets as a military of investors employing do-it-yourself trading platforms such as Robinhood loosely arranged on a Reddit forum and sent stock for the struggling retailer GameStop soaring. GameStop shares dropped some 1,600% in January, and hedge funds shorting the stock ended up losing heavily when they closed positions.
In the middle of the battle that apparently pitted everyday investors from institutional Wall Street firms, however, some trading platforms such as Robinhood abruptly restricted transactions on GameStop traders. The move drew immediate backlash from lawmakers on both sides of the aisle, even although Robinhood later said this wasn't because it was hoping to stop people from purchasing the inventory, but rather as a result of financial clearinghouse-mandated deposit requirements which increased amid the volatility.
Who Wins and Loses When Short Sellers, Social Networking, and Retail Investors Collide," started at noon eastern time.
Robinhood's Tenev opened by talking about the way the firm he co-founded helped break down conventional barriers for many to enter financial markets. Tenev also refuted allegations that trading constraints in the wake of the GameStop volatility have been set in place to assist hedge funds.
"There are just two points I wish to make clear in regards to the temporary limitations: First, Robinhood Securities put the restrictions in place in a bid to meet increased regulatory deposit conditions, not to assist hedge funds," he explained.
"Secondly, Robinhood immediately procured additional capital," he added, stating what happened in January won't happen again.
Tenev then delved into how the clearinghouse processes currently works, and advocated for real-time settlement rather than the present system that takes two weeks to get an equities transaction to be cleared and settled by a clearinghouse.
"There is no explanation as to why the best financial system in the world cannot settle transactions in real time," Tenev said.
Griffin, the chief executive of Citadel, echoed Tenev's thoughts, but also distanced Citadel from Robinhood's decision to restrict trading.
"I need to be perfectly clear: we had no role in Robinhood's decision to limit trading in GameStop or some other of the'meme' stocks," Griffin explained. "I first heard of Robinhood's trading limitations only after they were publicly announced."
Plotkin of Melvin Capital -- a hedge fund which took a significant reduction amid the GameStop saga -- likewise said his firm had nothing to do with Robinhood's choices to restrict trading.
"I understand that part of this focus of this hearing is the choices of inventory trading platforms to limit trading in GameStop," Plotkin said. "I wish to make clear at the outset that Melvin Capital played absolutely no role in those trading platforms' choices. In fact, Melvin shut out each its rankings in GameStop days before programs put those limitations in place."
"Like you, we heard about those limits from news reports," Plotkin added.
Moreover, Plotkin said that contrary to a lot of reports,"Melvin Capital wasn't'bailed out' in the midst of these events."
"Citadel proactively achieved to develop into a new investor, like the investments others make in our fund. It was an opportunity for Citadel to'buy low' and make returns for its shareholders when and if our fund's value went up," he said.
Reddit's Huffman discussed the system's part in the play and advocated for the r/WallStreetBets community.
"WallStreetBets may look sophomoric or chaotic in the exterior, but the simple fact that we are here now means they've managed to raise important issues about fairness and opportunity in our financial system," Huffman said. "I am proud they used Reddit to do so."
Huffman reported that an internal investigation found that bots, foreign actors or other players weren't involved in the GameStop-related action on r/WallStreetBets.
Eventually, Gill -- that the Reddit consumer many say initiated GameStop's surge -- discussed how he touted GameStop inventory for a value investment into his online foundation because he believed in the company.
Gill said he grew up purchasing at GameStop and believes the company still retains value, emphasizing he isn't a hedge fund or someone who provides investment advice for fees or commissions.
Gill stated the r/WallStreetBets forum is where regular investors came to talk about stocks, like how they would if they accumulated at a bar.
"Hedge funds and other Wall Street firms have teams of analysts working together to invent research and review investment ideas, while individual investors have not had that advantage," Gill said.
Gill ended his opening remarks by saying that he remains"bullish" on GameStop stock.