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Citadel and Robinhood CEOs will call for new stock trading rule at GameStop hearing

Players central to the GameStop market bonanza will call on Congress to shorten the time required for stock trades to settle, according to testimonies released ahead of their appearances at a Congressional hearing on Thursday.

Why it matters: A typically obscure part of stock trading is set to be among the issues at the forefront — as Robinhood and others look to deflect the anger that stemmed from the Reddit-fueled stock frenzy.

What they're saying: Billionaire Ken Griffinwill testify that there should only be one day between when a trade is executed and when it is settled — rather than the two business days it currently takes.

  • Robinhood CEO Vlad Tenev will go further, calling for trades to be settled in real-time.
  • This would have allowed the company "to better react to periods of increased volatility in the markets without restricting the purchasing of securities," Tenev will claim to lawmakers.

Flashback: Tenev has said the sharp jump in the amount of cash required to post while the trades settled caused it to curb trading on its platform — a move that sparked anger from users and lawmakers.

Griffin, who owns Citadel Securities, will also defend the firm's outsized role in carrying out the stock market trades made on Robinhood's platform and elsewhere.

  • "When others were unable or unwilling to handle the heavy volumes, Citadel Securities stepped up," Griffin will say.
  • He will note the company executed 7.4 billion shares at the height of the trading mania on behalf of retail investors in one day — more than the average daily volume for the entire equities market in 2019.

Of note:Reddit CEO Steve Huffman, who's also set to testify, will defend r/WallStreetBets — the community that served as ground-zero for "meme stock" posts.

  • Huffman says group activity "was well within normal parameters," and the group was not infiltrated by bots, foreign agents or bad actors.
  • Reddit trader Keith Gill will tell Congress the idea he used social media to "promote GameStop stock to unwitting investors is preposterous."

Gabe Plotkin, CEO of Melvin Capital — a hedge fund targeted on r/WallStreetBets for its short position in GameStop — will say he was "personally humbled" by the efforts that drove up the stock price, while emphasizing the antisemitic language directed toward him.

  • Per his testimony, Melvin closed out its GameStop short after six years last month. It received a cash infusion from Griffin-led hedge fund Citadel (and Point72) after suffering heavy losses.

Jennifer Schulp, a former official at financial regulator FINRA, will testify that the wild trading "did not present a systemic risk to the functioning of our markets."

  • Schulp, who's currently with the Cato Institute, will also say that regulatory changes in response to the episode are likely unnecessary "in light of the minimal impact on the market's function."

Go deeper: Read their testimonies...

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