Warren presses Fortress CEO Griffin about relationship with Robinhood, price for expose recede with the circulate

Sen. Elizabeth Warren (D-Mass.) is pressuring Fortress CEO Ken Griffin about the financial wide’s relationship with Robinhood, how Fortress advantages from their relationship and systems to offer protection to retail merchants.

In a letter despatched Thursday, Warren mentioned she is especially attracted to the capability war of hobby between the hedge fund facet of Fortress, which invested $2 billion in rapid-promoting agency Melvin Capital for its GameStop losses, and Fortress Securities, a practitioner of “price for expose recede with the circulate” for Robinhood.

“Each and each Robinhood and Fortress bear denied that Fortress had any characteristic in this option – but Congress and the final public deserve readability on the course of of and causes for these choices by Robinhood, which had a indispensable influence on many particular particular person merchants,” Warren mentioned in a six internet page letter.

Warren also asked Griffin about the controversial, yet shimmering diagram that Robinhood and other brokers receive a residing via trades despite shedding commissions: price for expose recede with the circulate. Robinhood and other brokers are huge beneficiaries of this income mannequin and receive payments from market makers love Fortress Securities.

“The cost for expose recede with the circulate mannequin raises questions about inherent conflicts of hobby and whether broker-sellers love Robinhood and market makers love Fortress Securities profit from speedy trading and market churn that has no relationship to the underlying values of the firm shares which can per chance per chance be being traded or the earnings of particular particular person merchants: it is as an different a substitute apply in which ‘[t]he more shares they explore, the more bread crumbs they interact,'” wrote Senator Warren.

Warren’s letter comes hours earlier than Griffin will testify to the U.S. Home Financial Products and services Committee testimony about the GameStop controversy on Thursday at 12 p.m. ET.

Warren despatched yet another letter to the Financial Industry Regulatory Authority (FINRA) on Thursday, asking about how the organization will reply to Robinhood’s characteristic in market volatility and its diagram to restrict trading of sure shares all the diagram via the GameStop mania.

Warren asked FINRA, which licenses and regulates broker deals, to behavior a evaluate into whether Robinhood’s practices had been in compliance with existing regulations and regulations governing broker-sellers.

“Given plenty of findings that Robinhood violated guidelines governing broker-sellers and lacked systems to make certain their compliance with these guidelines, the final public deserves to achieve what steps FINRA has taken to make certain future compliance by Robinhood, whether Robinhood improved its systems and compliance in step with the assorted complaints filed by regulators and lawmakers, and whether persisted violations of market guidelines may per chance per chance bear contributed to the firm’s characteristic in most modern market swings,” Warren wrote to Robert Cook dinner, FINRA President and CEO, in her 12-internet page letter.

— with reporting from CNBC’s Kate Rooney.

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