Sen. Elizabeth Warren, D-Mass.Tom Williams | CQ-Roll Name, Inc. | Getty PicturesSen. Elizabeth Warren is pressuring Citadel CEO Ken Griffin about h
Sen. Elizabeth Warren, D-Mass.
Tom Williams | CQ-Roll Name, Inc. | Getty Pictures
Sen. Elizabeth Warren is pressuring Citadel CEO Ken Griffin about his agency’s relationship with Robinhood after the web dealer curbed buying and selling in names like GameStop amid a volatility spike final month.
“Each Robinhood and Citadel have denied that Citadel had any position on this resolution – however Congress and the general public deserve readability on the method of and causes for these selections by Robinhood, which had a major influence on many particular person traders,” the Massachusetts Democrat mentioned in a letter despatched Thursday.
Warren mentioned she is anxious in regards to the potential battle of curiosity between the hedge-fund aspect of Citadel — which invested $2 billion in short-selling agency Melvin Capital for its GameStop losses — and Citadel’s securities division.
The senator additionally requested Griffin in regards to the controversial, but authorized, manner by which Robinhood and different brokers generate profits by trades regardless of dropping commissions: “fee for order stream.” Robinhood and different brokers are massive beneficiaries of this income mannequin and obtain funds from market makers equivalent to Citadel Securities.
“The fee for order stream mannequin raises questions on inherent conflicts of curiosity and whether or not broker-dealers like Robinhood and market makers like Citadel Securities revenue from speedy buying and selling and market churn that has no relationship to the underlying values of the corporate shares which are being traded or the earnings of particular person traders: it’s as an alternative a enterprise observe by which ‘[t]he extra shares they see, the extra bread crumbs they take,'” Warren wrote.
Warren’s letter got here hours earlier than Griffin’s scheduled testimony to the U.S. Home Monetary Companies Committee in regards to the GameStop buying and selling frenzy. The listening to is slated to start out at midday ET.
The senator despatched one other letter to the Monetary Business Regulatory Authority on Thursday, asking how FINRA will reply to Robinhood’s position within the latest market volatility and its resolution to restrict buying and selling of sure shares throughout the GameStop mania.
Warren requested FINRA, which licenses and regulates broker-dealers, to assessment whether or not Robinhood’s practices complied with present legal guidelines and laws.
“Given a number of findings that Robinhood violated guidelines governing broker-dealers and lacked techniques to make sure their compliance with these guidelines, the general public deserves to know what steps FINRA has taken to make sure future compliance by Robinhood,” Warren wrote to FINRA CEO Robert Cook dinner.
— with reporting from CNBC’s Kate Rooney.
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