Players at the center of the GameStop market bonanza will call on Congress to cut the time it takes to settle stock transactions, according to testimonials released prior to their performances at a Congressional hearing on Thursday.
Why it matters: A typically obscure part of the stock trading will be one of the issues to the fore – as Robinhood and others try to ward off the anger that came from the Reddit-fueled stock frenzy.
What they say: Billionaire Ken Griffin will testify that there should only be one day between the time a transaction is executed and the time it is settled – rather than the two business days that are currently required.
- Robinhood CEO Vlad Tenev goes further and calls for real-time settlement of transactions.
- This would have enabled the company to “better respond to periods of increased market volatility without restricting the purchase of securities,” Tenev will argue to lawmakers.
Flashback: Tenev has said that the surge in the amount of cash needed to post while the trades were being settled caused trading on his platform to be curbed – a move that angered users and lawmakers.
Griffin, owner of Citadel Securities, will also defend the company’s outsized role in executing its stock market trades on Robinhood’s platform and elsewhere.
- “When others were unable or unwilling to process the heavy volumes, Citadel Securities took a step,” Griffin said.
- He will note that at the height of the trading mania, the company was exporting 7.4 billion shares in one day on behalf of retail investors – more than the average daily volume for the entire stock market in 2019.
Of interest Reddit CEO Steve Huffman, who will also testify, will defend r / WallStreetBets – the community that served as the starting point for “meme stock” posts.
- Huffman says the group 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 it is ridiculous that he used social media to “promote GameStop stock to unwitting investors.”
Gabe Plotkin, CEO of Melvin Capital – a hedge fund focused on r / WallStreetBets because of his short position in GameStop – will say he was “personally humiliated” by the efforts to push up the stock price, while emphasizing the anti-Semitic language directed at him.
- According to his testimony, Melvin closed the GameStop shortly after six years last month. It received a cash injection from Griffin-led hedge fund Citadel (and Point72) after suffering heavy losses.
Jennifer Schulp, a former official at financial regulator FINRA, will testify that wild trade “posed no systemic risk to the functioning of our markets.”
- Schulp, who currently works at the Cato Institute, will also say that regulatory changes in response to the episode are unlikely to be necessary “in light of the minimal impact on the functioning of the market.”
Go deeper: Read their testimonials …