Robinhood, Melvin, Citadel Likely To Testify At Congressional Hearing On Trading Debacle

A congressional hearing planned for Feb. 18 about Robinhood’s GameStop trading debacle is expected to get testimony from Robinhood, Melvin Capital and Citadel Securities, Reuters reported on Wednesday (Feb. 10) citing sources.

The House Financial Services Committee is looking into the trading frenzy that saw the rapid and unexpected escalation of some stocks, like GameStop and AMC, while hedge funds like Melvin shorted the stocks and took a big hit.

Melvin lost 53 percent of its $12.5 billion in assets in January as retail traders seemingly went after hedge funds.

It is anticipated the hearing will be just the start of several investigations into what happened those days and weeks in January.

Citadel Securities came into play regarding its business relationships with companies like Robinhood and how payments and orders flow. Citadel Securities handles 20 percent of all U.S. equities volume and 39 percent of retail volume, according to its website, per Reuters.

The Federal Trade Commission last week said it had received over 100 complaints about Robinhood between Jan. 24 and Feb. 2. The week before, it got a total of seven. Complaints varied from the inability to cash out holdings or switch firms.

The trading frenzy forced Robinhood to restrict the trading of GameStop, AMC and other stocks due to volatility, a decision that caused an uproar from users and lawmakers. Some people sided with hedge fund managers who shorted those stocks. Robinhood said it had no choice but to restrict buys to meet capital requirements.

The GameStop saga might have pulled the rug out from under Robinhood’s plans for an initial public offering (IPO). The Security and Exchange Commission (SEC) is looking into the GameStop trading fiasco, and several lawsuits are underway. Congress is also reportedly looking into restrictions on hedge funds trading, including short selling.

In a PYMNTS interview, Yinon Ravid, CEO of the app-based financial advisory firm Albert, said that expanding the access and availability of financial advice can help this new breed of younger, digitally-savvy investors.