House Democrats sparred with the leaders of Robinhood Markets and Citadel on Thursday, with lawmakers pressing the firms on whether they’re profiting at the expense of retail investors and complaining that they got few satisfying answers.
At a closely watched hearing before the Financial Services Committee, Robinhood’s Vlad Tenev and Citadel’s Ken Griffin took fire on issues ranging from trading halts provoked by capital shortfalls to whether “free trades” are really free. At times, the chief executives’ long responses were cut off and met with derision. They were both adamant that their businesses have helped small-time investors access markets that were long the domain of Wall Street. “You are doing a great job of wasting my time,” Representative Brad Sherman, a California Democrat, told Griffin as he demanded the hedge fund billionaire provide a more succinct answer on whether the brokers Citadel pays for orders get the best deals for their clients.
Tenev, whose brokerage has attracted young investors with a simple mobile phone app and offer of commission-free trades, was accused of not fully informing its inexperienced clientele of the risks they are taking. The firm, said Democratic Representative Carolyn Maloney of New York, needs to “ensure retail customers don’t get the rug pulled out from under them.”
The exchange elicited a mea culpa from Tenev, who admitted the brokerage fell short of meeting its customers’ needs. “I’m sorry for what happened,” he said. “I’m not going to say that Robinhood did everything perfect and that we haven’t made mistakes in the past. But what I commit to is making sure that we improve from this.”
The hearing shed little light on the confluence of events that gripped Wall Street and Washington last month. Individual investors had banded together on Reddit to drive GameStop and other stocks to astronomical levels, triggering volatility that caused some hedge fund short-sellers to lose billions, while Robinhood and other online brokerages were forced to temporarily prevent their clients from buying.