Following below is a summary of the written testimony submitted in advance of today’s hearing in the House Financial Services Committee - “Game Stopped? Who Wins and Loses When Short Sellers, Social Media, and Retail Investors Collide”? – in the order as it appears on the Committee’s website (links to the individual testimony in the headers). The written testimonies are brief (with the exception of Robinhood’s), with some providing recommendations on potential regulatory changes, primarily around shortening the settlement cycle. Also below is a summary of the Committee memorandum on the hearing. A summary of the hearing itself will follow. Please let me know if you have any questions on the hearing or associated issues. Testimony of Vladimir Tenev, Chief Executive Officer, Robinhood Markets The written testimony spends a good portion discussing the “Robinhood Story” as well as the products and features offered by the brokerage platform and a look at Robinhood’s investors. The testimony does state at the outset that “any allegation that Robinhood acted to help hedge funds or other special interests to the detriment of our customers is absolutely false and market-distorting rhetoric” and that “[w]hat we experienced last month was extraordinary, and the trading limits we put in place on GameStop and other stocks were necessary to allow us to continue to meet the clearinghouse deposit requirements that we pay to support customer trading on our platform.” On payment for order flow, the testimony states “there have been questions about how we offer zero-commission trades and other benefits to customers.” Specifically, the testimony states that Robinhood has “negotiated the same rebate rate with each of the market-makers to whom we route customers’ orders, which eliminates any incentive for Robinhood to direct orders to any specific market maker” and that Robinhood customers received more than $1 billion in price improvement in the first half of 2020. The testimony also states that Robinhood Securities’ routing system is “designed to prioritize routing orders for execution to market venues based on the likelihood of obtaining price improvement in a stock over the last 30 days. We believe this model benefits customers by further seeking best execution for every trade on the Robinhood platform.” Finally, the testimony states that “[i]t is important to note that Robinhood’s payment for order flow relationships are with market-makers and not with hedge funds.” The testimony also defends the Robinhood app and states “even though we have made investing easier, we recognize it is not a game.” The testimony goes on to discuss some of the features of the app and admits that while Robinhood does not offer rewards or levels to encourage more trading it does “sparingly use features like confetti animation to celebrate certain infrequent milestone events or a reward stock for signing up or referring friends” and that “[u] ltimately, Robinhood listens to its customers and builds products that serve their needs” including its “Cash Management” feature that allows customers to deposit paychecks, pay bills, make debit-card purchases, manage their budget, and access cash from an ATM. As far as the events in January, the testimony states that “[o]nce again, I want to be clear. The action we took was for one reason and one reason only: to allow us to continue to meet our regulatory deposit requirements” and then discusses the clearing process and the related events during the week of January 25 surrounding Robinhood’s NSCC depository requirements. The testimony then discusses Robinhood’s customer notifications and communications. Specifically, the testimony notes that the ability to restrict trades is disclosed to customers when they sign up with Robinhood Financial and that “[t]hroughout this recent period of heightened volatility in GameStop and other securities, Robinhood Financial continued communicating with customers about the increased risks and the importance of being an informed investor.” The testimony does recommend changes to the T+2 settlement period, stating “[t]he existing two-day period to settle trades exposes investors and the industry to unnecessary risk and is ripe for change” and that “[t]here is no reason why the greatest financial system the world has ever seen cannot settle trades in real time.” The testimony then recommends that the “industry, Congress, regulators, and other stakeholders need to come together to deploy our intellectual capital and engineering resources to move to real-time settlement of U.S. equities.” Testimony of Kenneth Griffin, CEO, Citadel Citadel’s testimony is very brief and discusses (1) the retail investing landscape; (2) Citadel Securities’ role within the markets; and (3) opportunities for further market improvement. At the outset, the testimony states “I want to be perfectly clear: we had no role in Robinhood’s decision to limit trading in GameStop or any other of the “meme” stocks” and that “I first learned of Robinhood’s trading restrictions only after they were publicly announced.” On the retail investing landscape, the testimony notes that retail brokers have used payment for order flow to reduce the costs of trading and “it is a key reason why retail investors are able to trade for free or low commissions today.” On Citadel’s role in the markets, the testimony states that “[d]uring the period of frenzied retail equities trading, Citadel Securities was the only major market maker to provide continuous liquidity every minute of every trading day” and that on January 27, Citadel executed 7.4 billion shares on behalf of retail investors, which was more than the average daily volume of the entire U.S. equities market in 2019. Finally, on opportunities for market improvements, Citadel also recommended modernizing the settlement process, including shortening settlement cycles from T+2 to T+1, and that having transparent clearing house capital requirements would enable brokers and market makers to better prepare for potential capital demands and minimize the risk of associated market interruptions. Testimony of Gabriel Plotkin, Chief Investment Officer, Melvin Capital Management Melvin Capital’s written testimony also is very brief. Like Citadel, the testimony states that “I want to make clear at the outset that Melvin Capital played absolutely no role in [Robinhood’s] decisions. In fact, Melvin closed out all of its positions in GameStop days before [Robinhood] put those limitations in place. Like you, we learned about those limits from news reports.” The testimony also states that “I also want to make clear at the outset that contrary to many reports, Melvin Capital was not “bailed out” in the midst of these events. Citadel proactively reached out to become a new investor, similar to the investments others make in our fund. It was an opportunity for Citadel to “buy low” and earn returns for its investors if and when our fund’s value went up. To be sure, Melvin was managing through a difficult time, but we always had margin excess and we were not seeking a cash infusion.” As far as the specific events in January, the testimony states that as the “frenzy” began, Melvin started closing out its position in GameStop at a loss, “not because our investment thesis had changed but because something unprecedented was happening” and that Melvin also reduced many other positions at significant losses that were the subject of similar posts to those relating to GameStop. Testimony of Steve Huffman, Co-Founder & CEO, Reddit Reddit’s testimony is very brief, discussing what Reddit is (including describing Reddit as “the most human place on the internet”), the content moderation on Reddit (enforced by Reddit’s “Anti-Evil” team), the various Reddit communities (or “subreddits”), and how the Reddit content is ranked. The testimony states that “WallStreetBets is first and foremost a real community,” that the “self-deprecating jokes, the memes, the crass-at-times language, all reflect this,” and that “if you spend time on WallStreetBets, you’ll find a significant depth to this community, exhibited by the affection its members show one another.” The testimony states that Reddit analyzed the activity in WallStreetBets to determine whether “bots, foreign agents, or other bad actors” played a significant role and they found that not to be the case. Specifically, the activity in WallStreetBets was “well within normal parameters, and its moderation tools were working as expected.” Reddit did state it “will of course cooperate with valid legal requests from federal and state regulators” and that it believes this community was well within the bounds of its policies. Finally, the testimony states that “WallStreetBets may look sophomoric or chaotic from the outside, but the fact that we are here today means they’ve managed to raise important issues about fairness and opportunity in our financial system. I’m proud they used Reddit to do so.” Testimony of Keith Gill The testimony goes into depth on his personal background and stresses Mr. Gill’s role as an individual investor and that his views on GameStop was purely from his own research into the stock. The testimony addresses why he decided to share his investment ideas on social media. The testimony states that “[m]y investment skills had reached a level where I felt sharing them publicly could help others” and that hedge funds and other Wall Street firms “have teams of analysts working together to compile research and critique investment ideas, while individual investors have not had that advantage. Social media platforms like YouTube, Twitter, and WallStreetBets on Reddit are leveling the playing field.” The testimony goes on to state that “in a year of quarantines and COVID, engaging with other investors on social media was a safe way to socialize. We had fun.” As far as the specific events in January, the testimony states that the “idea that I used social media to promote GameStop stock to unwitting investors is preposterous.