Source Code: Your daily look at what matters in tech.

fintechfintechauthorTomio GeronNoneGet access to the Protocol | Fintech newsletter, research, news alerts and events.f6ea366a38
×

Get access to Protocol

Your information will be used in accordance with our Privacy Policy

I’m already a subscriber
Protocol | Fintech

Robinhood CEO Tenev apologizes and defends his company before Congress

Lawmakers debate more regulation and call for more transparency.

Robinhood CEO Tenev apologizes and defends his company before Congress

During a Congressional hearing on Thursday, Robinhood CEO Vlad Tenev argued that the GameStop crisis had a probability of happening once in 3.5 million times.

Photo: Daniel Acker/Bloomberg via Getty Images

Robinhood CEO Vlad Tenev appeared before Congress on Thursday to defend the company against accusations that Robinhood hurt retail investors by preventing them from selling shares and encouraging risky behavior as part of the GameStop stock trading drama.

Tenev appeared along with others, including Reddit CEO Steve Huffman, Citadel's Ken Griffin, Melvin Capital's Gabe Plotkin, and Keith Gill, who uses the handle "Roaring Kitty" on YouTube. While Tenev didn't answer all the questions that lawmakers posed, he had one big accomplishment: He didn't have any of the major gaffes that have plagued him in previous interviews.

"I'm sorry and I apologize," he said. "We are doing everything we can to make sure this doesn't happen again … Robinhood owns what happened, certainly, and we need to make sure it doesn't happen again. Robinhood Securities had limited options with how to address this."

Legislators pushed Tenev about the liquidity that Robinhood had on hand during the crisis when it stopped the buying of GameStop and other stocks. Tenev said that the company did not have a liquidity problem and raised $3.4 billion as a "cushion" and to ensure against another "black swan" event. "We met all of our regulatory capital requirements," he said.

But when pressed by Rep. Anthony Gonzalez as to whether Robinhood had $3 billion required by its clearinghouse early on the morning of Jan. 28, Tenev said, "At that moment we would not be able to post $3 billion in collateral."

Legislators also argued that Robinhood did not adequately prepare for the collateral problem. Tenev said the GameStop crisis had a probability of happening once in 3.5 million times.

One of the main areas of interest for lawmakers was payment for order flow, the system that Robinhood uses to generate revenue. Tenev acknowledged that more than half of Robinhood's revenue comes from payment for order flow.

Citadel Securities' Ken Griffin was pressed by Rep. Brad Sherman on whether it gives worse prices for Robinhood compared to other brokerages — so that, for example, paying for order flow gets worse price execution.

When asked by Sherman whether the same sized order for a stock coming from two different brokerages, such as Robinhood versus Fidelity, would get the same price, Griffin didn't directly answer the question. "The quality of the execution varies by the channel of the order," Griffin said.

"If you're going to filibuster, you should run for the Senate," Sherman replied.

Some legislators called for more transparency with short selling. Rep. Nydia Velázquez asked about the lack of requirements for hedge funds to disclose short positions, as they must do for long positions. Some legislators also criticized Robinhood for not providing more disclosure about why it restricts trading in certain stocks.

Lawmakers raised the issues with settlement of trades, and some called for steps to move towards real-time settlement of trades. Tenev said that real-time settlement would have prevented many of the problems that Robinhood faced, since it wouldn't have required as much collateral.

Retail investors also need more protections, lawmakers argued. Some pointed to what they called gamification, such as confetti design features, within Robinhood's app that encourages risky bets. Tenev said that Robinhood doesn't engage in gamification.

"Giving people what they want in a responsible way is what Robinhood is about," Tenev said. "We don't consider that gamification. We know that investing is serious."

Republicans on the committee argued in the hearing for fewer regulations or against more regulation in financial markets. They said that more regulation would not have prevented the problems that happened with GameStop. "Piling on more regulation only increases complexity," said Barry Loudermilk, a Republican from Georgia..

The ranking Republican on the committee, Patrick McHenry from North Carolina, argued for reducing regulation: advocating for lowering requirements for retail investors to invest in private startup companies, which are currently restricted to accredited investors. "Policies like the accredited investor definition blatantly pick winners and losers," he said.

Some lawmakers called for a financial transaction tax on stock trades. Rep. Rashida Talib argued that a majority of Americans support such a tax and that such a tax on the Hong Kong Exchange did not hurt that exchange.

Power

Google wants to (try to) make Google Glass cool again

Also this week: savvy virtual assistants, surveillance without violating people's privacy, and more patents from Big Tech.

Is making these cool even possible?

Image: Google

This week was so full of fun patent applications that I didn't know where to start. We've got a throwback to 2013, a virtual assistant that knows when I've stopped talking, and headphones that can determine a user's hearing abilities.

But as always, remember that the big tech companies file all kinds of crazy patents for things, and though most never amount to anything, some end up defining the future

Keep Reading Show less
Karyne Levy

Karyne Levy ( @karynelevy) is the West Coast editor at Protocol. Before joining Protocol, Karyne was a senior producer at Scribd, helping to create the original content program. Prior to that she was an assigning editor at NerdWallet, a senior tech editor at Business Insider, and the assistant managing editor at CNET, where she also hosted Rumor Has It for CNET TV. She lives outside San Francisco with her wife, son and lots of pets.

As President of Alibaba Group, I am often asked, "What is Alibaba doing in the U.S.?"

In fact, most people are not aware we have a business in the U.S. because we are not a U.S. consumer-facing service that people use every day – nor do we want to be. Our consumers – nearly 900 million of them – are located in China.

Keep Reading Show less
J. Michael Evans
Michael Evans leads and executes Alibaba Group's international strategy for globalizing the company and expanding its businesses outside of China.

Does Elon Musk make Tesla tech?

Between the massive valuation and the self-driving software, Tesla isn't hard to sell as a tech company. But does that mean that, in 10 years, every car will be tech?

You know what's not tech and is a car company? Volkswagen.

Image: Tesla/Protocol

From disagreements about what "Autopilot" should mean and SolarCity lawsuits to space colonization and Boring Company tunnels, extremely online Tesla CEO Elon Musk and his company stay firmly in the news, giving us all plenty of opportunities to consider whether the company that made electric cars cool counts as tech.

The massive valuation definitely screams tech, as does the company's investment in self-driving software and battery development. But at the end of the day, this might not be enough to convince skeptics that Tesla is anything other than a car company that uses tech. It also raises questions about the role that timeliness plays in calling something tech. In a potential future where EVs are the norm and many run on Tesla's own software — which is well within the realm of possibility — will Tesla lose its claim to a tech pedigree?

Keep Reading Show less
Becca Evans
Becca Evans is a copy editor and producer at Protocol. Previously she edited Carrie Ann Conversations, a wellness and lifestyle publication founded by Carrie Ann Inaba. She's also written for STYLECASTER. Becca lives in Los Angeles.
Protocol | Workplace

Apple isn’t the only tech company spooked by the delta variant

Spooked by rising cases of COVID-19, many tech companies delay their office reopening.

Apple and at least two other Silicon Valley companies have decided to delay their reopenings in response to rising COVID-19 case counts.

Photo: Luis Alvarez via Getty

Apple grabbed headlines this week when it told employees it would delay its office reopening until October or later. But the iPhone maker wasn't alone: At least two other Silicon Valley companies decided to delay their reopenings last week in response to rising COVID-19 case counts.

Both ServiceNow and Pure Storage opted to push back their September return-to-office dates last week, telling employees they can work remotely until at least the end of the year. Other companies may decide to exercise more caution given the current trends.

Keep Reading Show less
Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.
Protocol | Workplace

Half of working parents have felt discriminated against during COVID

A new survey found that working parents at the VP level are more likely to say they've faced discrimination at work than their lower-level counterparts.

A new survey looks at discrimination faced by working parents during the pandemic.

Photo: d3sign/Getty Images

The toll COVID-19 has taken on working parents — particularly working moms — is, by now, well-documented. The impact for parents in low-wage jobs has been particularly devastating.

But a new survey, shared exclusively with Protocol, finds that among parents who kept their jobs through the pandemic, people who hold more senior positions are actually more likely to say they faced discrimination at work than their lower-level colleagues.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Latest Stories