Hedge funds, Robinhood face grilling by Congress over GameStop Reddit rally
Skip to main content
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
  • Epaper
  • More
    • Subscribe
    • COVID-19
    • Bangladesh
    • Splash
    • Videos
    • Games
    • Long Read
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
The Business Standard

Tuesday
August 16, 2022

Sign In
Subscribe
  • Home
  • Economy
  • Stocks
  • Analysis
  • World+Biz
  • Sports
  • Features
  • Epaper
  • More
    • Subscribe
    • COVID-19
    • Bangladesh
    • Splash
    • Videos
    • Games
    • Long Read
    • Infograph
    • Interviews
    • Offbeat
    • Thoughts
    • Podcast
    • Quiz
    • Tech
    • Archive
    • Trial By Trivia
    • Magazine
    • Supplement
  • বাংলা
TUESDAY, AUGUST 16, 2022
Hedge funds, Robinhood face grilling by Congress over GameStop Reddit rally

Global Economy

Reuters
19 February, 2021, 12:10 am
Last modified: 19 February, 2021, 12:10 am

Related News

  • Trump ex-adviser Bannon convicted of contempt of US Congress
  • US Congress introduces resolution on 50th anniversary of Bangladesh-US ties
  • US Congress probe of deadly Capitol attack racing against election deadline
  • US Congress includes $300 million for Ukraine, addresses China in massive defense bill
  • With infrastructure vote, Congress gives Biden long-needed jolt of good news

Hedge funds, Robinhood face grilling by Congress over GameStop Reddit rally

“Many retail investors appeared to be motivated by beating Wall Street at its own game”

Reuters
19 February, 2021, 12:10 am
Last modified: 19 February, 2021, 12:10 am
FILE PHOTO: GameStop logo is seen in this illustration taken February 2, 2021. REUTERS/Dado Ruvic/Illustration
FILE PHOTO: GameStop logo is seen in this illustration taken February 2, 2021. REUTERS/Dado Ruvic/Illustration

Wall Street hedge fund managers, the chief executives of Robinhood and Reddit, and a YouTube streamer known as Roaring Kitty faced a grilling on Thursday by US lawmakers about the Reddit rally in shares of GameStop Corp.

Some of Wall Street's most powerful players, including billionaire Republican mega-donor and Citadel CEO Ken Griffin, will make rare public statements about their businesses during the congressional hearing on how Reddit users trading on retail platforms banded together to squeeze hedge funds that had bet against shares of the video game retailer and other companies.

Griffin will appear before the Democratic-led House finance panel alongside Robinhood CEO Vlad  Tenev, Melvin Capital CEO Gabriel  Plotkin, Reddit CEO Steve Huffman, and Keith Gill, a Reddit user and YouTube streamer known as Roaring Kitty who promoted his investment in GameStop.

The five men have been at the center of the saga, which roiled Wall Street in January prompting probes by several federal and state agencies.

With Wall Street critic Representative Maxine Waters at the helm and Alexandria Ocasio-Cortez and other progressives on the 54-member panel, the hearing promises to be fiery, with tough questions for Tenev, Griffin and  Plotkin in particular.

"Once or twice a year a hearing lends itself to good theater ... Thursday's hearing is one of those rarities," wrote Ian Katz at Alpha Partners in Washington, adding the hedge fund moguls are likely to be top targets for Democrats.

Waters has made it clear hedge funds are in her crosshairs, in January blaming their "unethical conduct" for the volatility.

"Many retail investors appeared to be motivated by beating Wall Street at its own game," she said at the hearing opening. "There are many whose beliefs the system is rigged against them has been enforced."

In prepared testimony published on Wednesday, the witnesses generally acknowledged the GameStop saga was unprecedented, but they all said there was no foul play on their part.

"Reddit users attempting to take down a hedge fund, that's an extraordinary thing...This is a break from history," Representative Patrick McHenry, the senior Republican on the House panel, told reporters before the hearing. "Congress has to do a lot more work to understand the nature of what occurred."

The Reddit rally drove massive volatility in GameStop and other shares, prompting the post-trade "clearing" houses that guarantee trades to call for billions of dollars in extra collateral from Robinhood and other retail trading platforms.

In response, many suspended buying in the affected stocks on Jan. 28. Lawmakers from both parties were outraged and questioned if the trading platforms were siding with hedge funds over Mom and Pop investors.

New York-based Melvin Capital, one hedge fund that had bet GameStop's shares would tumble, suffered massive losses as the stock soared leading up to Jan. 28. Citadel made a $2 billion investment in Melvin on Jan. 25.

Lawmakers will likely focus on whether Robinhood made it too easy for small investors to take risks, said analysts. Its commercial arrangements with market makers to which it routes orders may also be a hot topic, they said, as well as whether that "payment for order flow" model may disadvantage customers.

Robinhood says few of its customers engage in risky trades, while "payment for order flow" often helps customers get better prices than trading on a stock exchange.

Tenev, Griffin and Plotkin are likely to be grilled on short selling, and whether Robinhood's decision to suspend buying in the affected stocks was influenced by Citadel or Griffin, who majority-owns Citadel Securities, a Robinhood market maker.

All parties have denied any attempt by Citadel or Citadel Securities to influence Robinhood's policies.

Gill and Huffman are expected to field questions on the role of social media platforms in potential market manipulation.

Yet long-term legislative action is unlikely once the fireworks dissipate, said Isaac Boltansky, director of policy research at Washington-based Compass Point Research & Trading.

"We doubt that Washington can advance an acute policy prescription when broader concerns regarding equity market structure and economic equality complicate the conversation."

World+Biz

US Congress / GameStop

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • This is how people are choked with rising cost of living
    This is how people are choked with rising cost of living
  • File photo. Forty-four countries imported LNG last year, almost twice as many as a decade ago. Photo: Asim Hafeez/Bloomberg
    Unaffordability of LNG may leave new import terminals redundant: IEEFA
  • Photo: TBS
    5 crushed to death as BRT girder falls on car in Uttara

MOST VIEWED

  • The corporate logo of financial firm Morgan Stanley is pictured on a building in San Diego, California September 24, 2013. REUTERS/Mike Blake
    Goldman, Morgan Stanley seek to end investors' Archegos-linked lawsuits
  • A small toy figure and gold imitation are seen in front of the Polyus logo in this illustration taken November 19, 2021. REUTERS/Dado Ruvic/Illustration
    Russia's Polyus plans bond issue denominated in yuan
  • Traders work on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 2, 2022. REUTERS/Andrew Kelly
    Global stocks fall, US dollar gains after surprise China data
  • Emptier than we thought.Photographer: SeongJoon Cho/Bloomberg
    Oil demand forecasts aren't as bullish as they seem
  • The Federal Reserve building is pictured in Washington, DC, US, August 22, 2018. REUTERS/Chris Wattie/File Photo
    As Fed warns of turbulence ahead, markets remove their seat belts
  • Walmart shopping carts are seen on the parking lot ahead of the Thanksgiving holiday in Chicago, Illinois, US November 27, 2019. Photo:Reuters
    More pain or rebound? Investors brace for retail earnings

Related News

  • Trump ex-adviser Bannon convicted of contempt of US Congress
  • US Congress introduces resolution on 50th anniversary of Bangladesh-US ties
  • US Congress probe of deadly Capitol attack racing against election deadline
  • US Congress includes $300 million for Ukraine, addresses China in massive defense bill
  • With infrastructure vote, Congress gives Biden long-needed jolt of good news

Features

TBS Sketch

Bangabandhu and the spirit of Liberation War were killed in 1975

10h | Supplement
The macabre multicide: How we failed our supreme leader

The macabre multicide: How we failed our supreme leader

13h | Supplement
Bangabandhu Sheikh Mujibur Rahman with his eldest daughter Sheikh Hasina and his grandson Sajeeb Wazed at his Dhanmondi residence. Photo: Achieve

The darkest night of 15 August

15h | Supplement
As long as the Padma and the Meghna will flow…

As long as the Padma and the Meghna will flow…

16h | Supplement

More Videos from TBS

Public pay homage to Bangabandhu

Public pay homage to Bangabandhu

5h | Videos
What will happen if Ukraine's Zaporizhia nuclear plant explodes?

What will happen if Ukraine's Zaporizhia nuclear plant explodes?

6h | Videos
Bangabandhu Sheikh Mujibur Rahman, the undisputed leader

Bangabandhu Sheikh Mujibur Rahman, the undisputed leader

6h | Videos
How is Bangladesh benefited from receiving India's daily import quota?

How is Bangladesh benefited from receiving India's daily import quota?

7h | Videos

Most Read

1
Dollar crisis: BB orders removal of 6 banks’ treasury chiefs 
Banking

Dollar crisis: BB orders removal of 6 banks’ treasury chiefs 

2
From left Afzal Karim, Murshedul Kabir and Mohammad Jahangir
Banking

Sonali, Agrani and Rupali banks get new MDs

3
Photo: TBS
Bangladesh

5 crushed to death as BRT girder falls on car in Uttara

4
Dollar price drops by Tk8 in kerb market
Economy

Dollar price drops by Tk8 in kerb market

5
Representational Image. Photo: Collected
Bangladesh

Air passengers should plan extra commute time to airport: DMP

6
Photo: Collected
Transport

Will Tokyo’s traffic model solve Dhaka’s gridlocks?

EMAIL US
[email protected]
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Privacy Policy
  • Comment Policy
Copyright © 2022
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - [email protected]

For advertisement- [email protected]