to tap on anything. we wanted to give our customers delightful features to know that we were listening to them and that we care about them, and this is just one example of how we add a great features that customers love to our products. >> addictive trading must be bad for your customers, but it is good for robinhood. addictive trading means more trading and more trading means more money for robinhood and there is a sense for when robinhood monetizes addiction. you make money from the quantity rather than the quality of trading. much has been said about improvement, and one of the arguments for payment is price improvement. according to the wall street journal, said adele claims to have saved investors

$1.3 billion last year. but how could citadel know? it transacts directly with brokers and even if you stipulate that there has been a cost savings, it is unclear to me how much of the cost savings is being passed on to the retail investor, and how much of the cost savings is actually being pocketed by robinhood as profit. we know there is no commission at the front end, but what is the hidden cost of two investors at the back end of the transaction? can you give me clarity about the hidden cost? >> that is a very important question. in 2020, robinhood provided our customers in excess of $1 billion in price improvement. that price improvement is measured relative to the national best bid and best offer which is the reference price for

all major exchanges. >> i ran out of time so i will yield back. >> madam chair?

madam waters: we were having a technical problem. mr. taylor, you are recognized for five minutes. >> we'll point out that today and this week has been very hard for my home state of texas and my district in callan county -- collin county. we have faced a record-breaking freeze across the state which has crushed our power generation ability and we have had some really heartbreaking stories. during this hearing, i was called away to help a mayor trying to get power back to their water stations, so for

those members of the committee, i encourage you to send the thoughts and prayers people of texas as they go through this time. onto the topic of this hearing, mr. tenev, there have been questions about the margin call that you god on the morning of the 20th of january, but i am not sure we really understand how the markets call change from $3 billion to $1.5 million. can you go through how did you negotiate the margin call down? these are very sizable decreases. 57% to something that you could get in and manage, how did you decrease the margin call? you are on mute. mr. tenev: --

>> you are still on mute, i have not been able to hear a word you said unfortunately. mr. tenev: how about now? >> i can hear you now. mr. tenev: i appreciate the question. i want to send my thoughts and prayers to the people of the great state of texas. i appreciate you mentioning that. i would like to refer to my written testimony which has the detailed tick tock of everything that happened. pages 9 through 11. >> i have read that, but did you go through and say, hey, i will not sell these stocks until you reduce and that is how you got to the point where people could only sell the stock and not by it, is that what you did? because that is not in your written testimony, so i am

trying to get your answer. mr. tenev: i do not believe that we had made any decisions on the stocks between the initial $3 -- 3 billion requests and the 1.4 billion requests. but between the 1.4 and the 700 billion, there was a discussion between our operational team at robinhood securities, and the relative counterparts regarding what measures we intend to take to lower the risk of our portfolio. >> in other words, if you had 3 billion, your customers would have been able to do everything they wanted to do including purchase gamestop? mr. tenev: i don't want to speculate on that. if we had infinite capital, certainly. it is important to note that this was an evolving situation and we had not seen it before. we had no idea what friday would

have looked like had we been able to allow customers to buy the securities unrestricted on thursday. it is difficult to speculate how things would have been different. >> isn't the reason they said that you needed $3 billion was because your customers wanted gamestop, but that reduced the u needed? it seems to me that would happen. mr. tenev: they were not saying specifically that -- nobody i believe did not want our customers to buy gamestop. these are regulatory mandated deposit requirements that we had to comply with that were influenced by the concentrated activity in gamestop, amc, and the other securities. >> wouldn't it be fair to say that your firm was undercapitalized to allow your customers to do what it is you wanted them to do? mr. tenev: i think congressman,

certainly in this case, if we had the additional capital, we would have been able to ease restrictions or perhaps, unrestricted altogether. it is important to note, lots of other firms did similar things if not the same thing in restricting the buying, so this was a systemic problem rather than a robinhood problem. >> but didn't the fact that you went out, raise more capital so you could answer this problem in the future, doesn't that imply that you were undercapitalized? mr. tenev: again, we met all of our regulatory capital requirements. >> your customers wanted to buy the stock and you would not let them do it because you did not have the capital to allow them to do it, right? >> yes. we did not have -- >> i think that is a core problem that i think this committee hearing is showing me,

is that you were unfortunately undercapitalized to help your customers do what they wanted to do. i yelled back. -- i yield back. >> thank you, very much. >> i appreciate it. am i up? i believe i am. as previously noted in this hearing, one of your colleagues at the witness table, my first question is how many people are in the room with you right now? mr. gill? mr. gill: zero. >> that is what i thought. i just want to note for the entire committee, mr. gill is

appearing before our panel by himself while many others are receiving significant help, underestimating the independence of these individual investments. we heard a lot of reasons for concern, some are legitimate, but also some posed overreaction by members of congress to create even more problems. the attention has been given -- no attention has been given to the positive side of the story. temporarily limiting investors from trading, which deserves an investigation, what we saw was a movement of individuals trying to make money. i do not see anything wrong with that, even if it is the desire to stick it to a hedge fund they don't like. mr. gill, you are the only retail investor involved in this gamestop hearing, yet members on the committee have hardly asked

you any questions. we have heard from a lot of the companies involved in this event, but we barely heard from the people that this happened. is there anything that you would like to add that you have not been able to add yet, given that we are past the four hour mark on this hearing? mr. gill: i do not have anything to add to. i would be the first to acknowledge that investing in stocks and options is incredibly risky and it is important for people to do their own research before investing, but that said, i tend to agree with you. folks should be able to freely express their views on a stock and they should be able to buy or not to buy a stock based on the views they have. >> on that note, how would you feel if these brilliant people that are asking you these questions today this cited that you should not take the risks?

what do you think about that? mr. gill: i would probably ask for an explanation, and try to understand their viewpoint. and perhaps we would be able to talk through it. rep. emmer: i appreciate it. i think we need to value the right of the individual to make decisions for themselves and that is fantastic to see some of getting involved and for dissipating in the greatest financial markets in the world and we should be encouraging individual participation in the markets by you and others, and we should want more people. we do not need the people from the mountaintop deciding who is capable and incapable. we need more people having the opportunity to develop financial literacy. to build their own portfolios. to secure a safe and comfortable return. to grow their wealth so they can send their kids to college, and most importantly, we should

strive for individuals to have autonomy and to do all that they themselves would want to do with having to rely on others, or god for bid, their government. i also want to thank mr. budd for using his time to acknowledge applications, and this important now that we utilize a technology that we have access to, and we do not have access to technology -- and we do, i'm sorry, to technology that is decentralized. mr. lynch and i have a nonpartisan bill that we introduced, or reintroduced that concerns this. if we should exercise oversight of anything, it is to ensure that individuals maintain access to our markets. individual investors. discussions about over and undervalued companies only need to increase.

unfortunately, average investors were locked out of the markets at a time with extreme volatility while institutional investors were not. while i understand that it came down to liquidity issues, individual investors were in a vulnerable position and at the will of an online brokerage. we should be taking this time to discuss how to move forward in a way that promotes market access to all investors. clearly, they do not understand how you utilize social media. and catalyze -- we have not been focusing on improving market action. >> the gentleman's time has expired. mr. lynch. rep. lynch: thank you. speaking for the families of the eighth congressional district, we want the tenement from texas

to know that we are praying for the people of texas. we hope that you get the power that you need. i do want to follow up on the questions. i represent the eighth congressional district which includes brockton, massachusetts, your home. i owe you the opportunity to respond, but you earlier said that you began your trading in gamestop around five dollars a share. with the hope that it might go to $20 or $25. i want to say, i accept your initial analysis that gamestop was undervalued, and i think your belief was sincere. i think it was fact-based. in your defense, we are talking about gamestop. it is a shopping mall retailer, we all know it, it is a well-known commodity.

at some point, the stock really takes off. it goes from five dollars to $100, the $200, to $300. it gains a skate velocity. it inside almost five dollars a share. -- it ends at almost $500 a share. we are still in a pandemic and you can land a jumbo jet and the parking lot of westgate small in brockton or any major mall in america. nobody is going to the malls. no one is feeding these companies, so it is up around $500. is there a role for someone to play here, for you to play, or the sec, or robinhood to say, ok, the price dislocation has become detached from reality,

and a note of caution might be given to other day traders, and individuals, retail traders who might get jammed from getting into the strata. from your perspective, what do you think -- getting into this trade. from your perspective, what do you think the proper thing that should happen? this thing got away from you and totally into the stratosphere, and i want to know your thoughts. mr. gill: i do know westgate small quite well. just to be clear, i had thought that roughly $20 to $25 per share, i had thought that that time, but investment theses evolve over time. as fundamental change over time, it is important to update theses accordingly. it appeared that the stock price had gotten a little ahead of itself last month, but there is

a lot that has happened in recent months to suggested that gamestop could indeed turn around its business significantly, and one big element is one of the largest investors in gamestop, brian, and he has brought in some colleagues that have -- sorry. rep, lynch: miss schulp, we got this convergence between social media, and markets. if anything, the converted in this of gamestop has demonstrated a vulnerability in our markets. i am just wondering if a loosely association of day traders can cause all of this upset in our market. isn't there a wider national security issue out there in

terms of other people who might be nefarious actors or actually intentionally trying to disrupt our markets -- isn't there a national security dimension to all of this as well? mr. schulp: i can say that national security is not my area of expertise. rep, lynch: something more specific then. you said earlier, you are with finra, they are under regulation sei. is it appropriate to put some of these trading platforms under that same regulation, which requires them to develop systems and policies that protect the integrity of their systems? mr. schulp: protecting the integrity of systems is important for all trading platforms, not simply the robinhood's of the world. we need to look to make sure there is integrity on the platform.

i would agree with that, not necessarily sci in particular, but having platforms that are strong is important. rep, lynch: thank you, i yield back. chair waters: we are having a few technical difficulties and we will be right back, and we are back. miss adams, you are recognized for five minutes. rep. adams: thank you. it has been a very interesting meeting, and i want to thank you for organizing this. ms. schulp, in the case of gamestop and amc, the prevailing narrative has been that a band

of reddit inspired folks rose up against a wall street, forced the short squeeze by professional hedge fund managers who were forced to cover negative bets or risk catastrophic losses. according to a j.p. morgan analyst, as big drivers of the wild price action on the way up, and in your opinion, and based on historical data on retail investors ability to move the markets, what is the likelihood that gamestop and amcs market volatility was largely driven by institutional investors looking to ride the wave? ms. schulp: these are questions that we are going to find out the answers to as we get deeper into the data, but it is likely that some point in this increased in value for all of the stocks, institutional investors were involved. retail investors traditionally have not been able to move markets in the same way, but it is important to note that these

were not large stocks to begin with. this was not a massive increase in price and apple or google. it was gamestop, a much smaller company. the ability of retail investors that have outside influence here is entirely possible. rep. adams: thank you. mr. griffin, mr. plotkin, do you have any thoughts? mr. griffin: i believe you are asking one of the single most important questions posed today. i believe that the decline in the short interest as reported over the two week time, indicates roughly, and i apologize, roughly 35 to 40 million shares were bought back by parties that were short in stock. this would be a dramatic degree of short covering that could

cause a dramatic increase in the price of gamestop. mr. plotkin: thank you for the question. i think, i do not have the exact answer to your question, but it is worth noting that the stock price move tire, there was a three day period where it traded almost 11 times during the entire flow. that kind of volume gave everyone who was short the opportunity to cover, and possibly institutional buying or some sort of combination. we did look at some of the activity in the stock and friday, january 22nd, there are options that were expiring that would have equated to 35 to 40 million shares of stock ownership. i do not think the short covering was the biggest driver of the stock when you look at the volume. i think the biggest driver was the aggressive options activity and then whether it was

institutional or retail, just the collective buying. rep. adams: prior to the gamestop activity, did citadel have any investments in melding capital, and if so, how much? mr. griffin: we first invested in melding capital the monday of the week in question. that was the 24th and january, and prior to that, we have had no investors with melding capital. and one of the best money managers, followed by partners in citadel, and it gave actually one of my best portfolio managers that work with me over the course of his career. so well done to my colleagues at citadel. rep. adams: mr. plotkin, can you -- >> my portfolio manager worked

at a different firm and then joined citadel, subsequently. rep. adams: ok. mr. plotkin, can you confirm that you worked at citadel llc before starting your own hedge fund, melvin n 2014? mr. plotkin: when i was 23 years old, i worked at citadel for one year. rep. adams: did you solicit or receive any advice from mr. griffin during the gamestop volatility that occurred? mr. plotkin: all of my conversations with mr. griffin centered around his investment in our firm. rep. adams: did you reach out to citadel on 172, real estate investments? chair waters: thank -- the woman's time has expired. >> thank you. hello, everyone.

i am so glad we are having this hearing am appreciative of the chairwoman's leadership. the wealthiest 10% own 84% of all stocks. 50% of american families own no stock at all. i say this to emphasize that to many of my residents, the stock market is a casino for the rich gambling hurts pension and retirement funds. when you all screw up, the people end up paying through losses or bailouts. i want to talk about the high-frequency trading. we know about half of all stock trading in the u.s. is done by computers and analyzes market activity, and instantly completes trades at a profit. it allows wall street traders to get ahead of transactions by pension accounts and retirement

accounts. mr. griffin, and this is a yes or no question -- is citadel's trading algorithm program done by pension and retirement funds, yes or no? mr. griffin: today, virtually all trades executed are in the form of program trades such as algorithm trades. >> so that is a yes? mr. griffin: it is a complex question. trades are not large trades -- it is not like there is 10 million shares of alibaba. it is sliced into small slices, 100 or 200 shares, and executed over the course of a day, a week, or a month. >> does this increased cost, this algorithm a or whatever program to identify in trade,

the computers doing the trading, does this increased cost for people who have pensions and retirement funds, yes or no? mr. griffin: given that we -- >> this is not out of disrespect, this is just limited time. mr. griffin: we execute on behalf of our hedge fund, and have generated a exceptional return for pension plans and endowments. >> i am going to help you out. some estimates indicate that as a result of the high-frequency trading, pension and retirement accounts pay nearly $5 billion in the tax. this means that wall street firms like yours engaging in high-frequency trades are making money at the expense of my residents' retirement funds. so one way to ensure that the enormous wealth reaches the real economy, what is happening in our community and in my district, is to enact and look at proposals like a transaction tax.

according to recent polling, the majority of americans -- all of you need to hear this, majority of americans agree to taxing at zero point 1%, and that would raise $800 billion over 10 years, which could fund the programs like expanding health care, public education, and i heard my friend from texas talk about access to water and electricity. guess what? in my community, it is so poor that i have families melting snow so they can flush their toilets because they have no access to water. this tax would discourage unfair high-frequency trading. does citadel's lobbyists right now hired to propose transaction tax because it would make high-frequency trading less profitable? mr. griffin: we we firmly beliea

transaction tax would injure americans hoping to save for retirement. i believe vanguard has publicly come out and said we have to walk about -- rep. talib: i am reclaiming my time. the hong kong stock market imposes a 0.2% tax on transactions as a result and sees literal high-frequency trading, but this has not stopped the hong kong stock market from becoming the third largest in the world after new york and london. just to be clear, let's not gaslight the american people. y'all be fine with the tax. and it is fair, because our folks are tired of bailing you out when you screw up and gamble with retirement funds, and that is exactly what happens every moment. the reason why we are having this hearing is that sometimes you are irresponsible and it is set up in a way to help only the wealthy and leaves people like my community here with this large income inequality