WASHINGTON, Feb 19 — The head of trading app Robinhood and Wall Street hedge fund managers yesterday fielded a barrage of questions in the US Congress about their role in the GameStop trading frenzy, at times being cut off by irate lawmakers who found their answers wanting.

Financial heavyweights including billionaire Republican mega-donor and Citadel CEO Ken Griffin defended their businesses at the hearing, which lasted more than five hours. Lawmakers probed how Reddit users trading on retail platforms squeezed hedge funds that had bet against shares of the video game retailer and other companies.

"Robinhood owns what happened and we need to make sure it doesn’t happen again,” said Robinhood CEO Vlad Tenev, who appeared to field the most questions.

Robinhood and other trading apps drew fire for putting trading limits on GameStop a day after the stock price more than doubled. The trading platforms, who face numerous lawsuits, said the limits were needed because the massive volatility prompted clearing houses that guarantee trades to call for billions of dollars in extra collateral.

But outraged lawmakers questioned if the platforms were siding with hedge funds over retail investors.

Representative Sean Casten, an Illinois Democrat, played an automated message on the Robinhood customer service phone line while questioning Tenev about how customers are treated.

Griffin got numerous questions which focused on his company’s heft. Melvin Capital CEO Gabriel Plotkin and Reddit CEO Steve Huffman also appeared.

Keith Gill, a Reddit user and YouTube streamer known as Roaring Kitty, sat in a red videogaming chair from which he recorded many videos promoting his investment in GameStop. Displayed behind him was a poster of a kitten with the caption "Hang in there!” Many investors who bought GameStop as the price skyrocketed now face deep losses.

"A few things I am not. I am not a cat. I am not an institutional investor, nor am I a hedge fund,” Gill said. He told lawmakers he was still enthusiastic about the stock.

"I am just an individual whose investment in GameStop and posts on social media were based upon my own research and analysis,” he said.

Representative Maxine Waters, chair of the Democratic-led House finance panel, is a critic of Wall Street, while Republicans on the panel also sought to burnish their consumer-protection credentials, making for a fiery virtual hearing featuring echoes, feedback and background noise.

Waters, who in January called hedge funds "unethical,” frequently talked over Tenev and Griffin and cut them off. At the end, she vowed to hold more hearings, with testimony from regulators at the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

She said she was "more concerned than ever” that retail investors were being taken advantage of, and that large market makers like Citadel could pose a threat to the financial system.

In prepared opening testimony, the witnesses generally acknowledged the GameStop saga was unprecedented, but they all said there was no foul play on their part.

Tenev expressed regret that Robinhood’s actions upset customers but said no hedge funds influenced its decision and the situation would have been "significantly worse” if it had not suspended buying.

"I’m sorry for what happened. I apologise. I’m not going to say that Robinhood did everything perfect,” he said.

New York-based hedge fund Melvin Capital, which had bet GameStop’s shares would tumble, suffered massive losses as the stock soared leading up to January 28. Citadel made a US$2 billion (RM8.1 billion) investment in Melvin on January 25.

Lawmakers quizzed Robinhood’s commercial arrangements with market makers to which it routes orders, as well as whether that "payment for order flow” model hurts customers.

Griffin, majority owner of Citadel Securities, a Robinhood market maker, was castigated by Democratic Representative Brad Sherman for evading his question about whether market-makers provide the same prices to all brokers.

Griffin maintained Citadel Securities, which executes roughly 47 per cent of all US-listed retail volume, had worked for years to help give consumers "a better price.”

All parties have denied any attempt by Citadel or Citadel Securities to influence Robinhood’s policies.

Manipulation

Gill and Huffman were asked about the role of social media platforms in potential market manipulation.

"We spend a lot of time at Reddit ensuring the authenticity of our platform... And in this specific case, we did not see any signs of manipulation,” Huffman told lawmakers.

At times, Gill and Plotkin offered their competing investment theses on GameStop, with Plotkin arguing that due to the rise of digital downloads, the video game bricks-and-mortar business model has "structural challenges.” — Reuters