Vlad Tenev, Robinhood CEO, denied that his platform was helping various hedge funds. He was speaking ahead of appearing before United States lawmakers who will grill him over the GameStop trading saga. Tenev wants the SEC to get rid of a two-day settlement rule while preparing for a Congressional hearing.
In his prepared remarks, he seemed to place responsibility for the platform’s stock trading suspensions on the United States Securities and Exchange Commission. According to Tenev, Robinhood blocked trading to meet all regulatory deposit requirements as described by the SEC. The CEO particularly criticized a SEC rule that needs equities transactions to clear over two days:
“It takes several days for the clearinghouse to process the transaction […] This is known as “T+2” settlement, denoting the trade date plus a two-day ‘settlement period.’ This T+2 settlement cycle is codified by SEC Rule 15c6-1(a), which prohibits broker-dealers from effecting the purchase or sale of a security later than the second business day after the execution of the trade.”
Now Tenev wants the authority to update its trading rules to enable clearinghouses to support real-time settlement instead of a 2-day settlement period. He wrote:
“There is no reason why the greatest financial system the world has ever seen cannot settle trades in real-time. Doing so would greatly mitigate the risk that such processing poses.”
Previously Robinhood released a blog post excoriating the 2-day settlement on February 2, 2021. Tenev also referred to a January 30 investor alert by the SEC in his testimony. The alert made it clear that broker-dealers have the right to reject or limit user transactions for “legal, compliance, or risk management reasons.”
The Robinhood Trading Saga
The Robinhood CEO also denied reports that his platform blocked trading at the request of most hedge funds. He said that any claim that Robinhood acted to help the hedge funds or other interests to the detriment of their clients is false and just market-distorting rhetoric.
Interestingly, Robinhood’s GameStop saga began on January 28 when the firm stopped buying services for the GameStop stock and some other shares that were suspected to have been pumped by the r/Wallstreetbets Reddit community.
After these trade restrictions, the community said that Robinhood was acting to protect the interests of various hedge funds like Melvin Capital and Citadel at the expense of Reddit retail investors.
In early February, House Representative Maxine Waters (D-CA) said that there are plans to hold a virtual hearing that will be devoted to the GameStop saga. These hearings are scheduled for 12:00 PM ET. Melvin Capital CEO Gabriel Plotkin, Reddit CEO Steve Huffman, and Citadel CEO Kenneth Griffin will also feature in these hearings.