Sen. Elizabeth Warren, D-Mass.
Tom Williams | CQ-Roll Name, Inc. | Getty Photos
Sen. Elizabeth Warren is pressuring Citadel CEO Ken Griffin about his company’s relationship with Robinhood after the on-line dealer curbed trading in names like GameStop amid a volatility spike final month.
“Each Robinhood and Citadel maintain denied that Citadel had any role on this resolution – but Congress and the public deserve readability on the formulation of and causes for these choices by Robinhood, which had a indispensable impact on many particular individual investors,” the Massachusetts Democrat stated in a letter sent Thursday.
Warren stated she is taking into account the aptitude battle of hobby between the hedge-fund facet of Citadel — which invested $2 billion briefly-selling company Melvin Capital for its GameStop losses — and Citadel’s securities division.
The senator moreover requested Griffin regarding the controversial, yet prison, scheme wherein Robinhood and other brokers ticket money through trades no topic dropping commissions: “fee for remark float.” Robinhood and other brokers are massive beneficiaries of this income mannequin and salvage payments from market makers much like Citadel Securities.
“The fee for remark float mannequin raises questions about inherent conflicts of hobby and whether dealer-dealers like Robinhood and market makers like Citadel Securities cash in on like a flash trading and market churn that has no relationship to the underlying values of the firm stocks which can be being traded or the earnings of particular individual investors: it is as a alternative a enterprise put collectively wherein ‘[t]he extra shares they sight, the extra bread crumbs they purchase,'” Warren wrote.
Warren’s letter came hours previous to Griffin’s scheduled testimony to the U.S. Residence Monetary Companies and products Committee regarding the GameStop trading frenzy. The listening to is slated to originate at noon ET.
The senator sent one other letter to the Monetary Alternate Regulatory Authority on Thursday, asking how FINRA will acknowledge to Robinhood’s role in the recent market volatility and its resolution to restrict trading of clear stocks throughout the GameStop mania.
Warren requested FINRA, which licenses and regulates dealer-dealers, to maintain a study whether Robinhood’s practices complied with present prison guidelines and regulations.
“Given several findings that Robinhood violated concepts governing dealer-dealers and lacked systems to ticket clear their compliance with those concepts, the public deserves to designate what steps FINRA has taken to ticket clear future compliance by Robinhood,” Warren wrote to FINRA CEO Robert Cook dinner.
— with reporting from CNBC’s Kate Rooney.
Subscribe to CNBC PRO for uncommon insights and diagnosis, and stay enterprise day programming from all around the sector.