Sen. Pat Toomey told CNBC on Tuesday that he welcomes stock trading apps that make investment look more accessible, rejecting complaints by some that breaches like Robinhood have led to gamification on equality market.
The Pennsylvania Republican made remarks on “Squawk Box” ahead of a Senate Banking Committee hearing Tuesday morning on retail investors and the GameStop trading frenzy that began in January. Toomey is a ranking member of the committee.
“There’s a lot of criticism about gamification. … The idea that you’re making investment experience easy and straightforward is a problem for some people. Not for me,” Toomey told CNBC.
The activity of Robinhood, a breaking app that started trading with zero commission and was popular with young investors, was investigated even before the Reddit-fueled GameStop saga caught the attention of Wall Street earlier this year. The outbreak also saw millions of new users due to the pandemic of coronavirus when people began buying and selling stocks while at home.
“The worst of what they do clearly is the way they deceive the idea of investing,” Commonwealth Massachusetts Secretary William Galvin told CNBC in December out after the secure regulator filed a complaint against Robinhood.
Robinhood has consistently denied complaints about its approach to investing and user experience on its app. In evidence submitted to the House Financial Services Committee in February for an earlier GameStop hearing, Robinhood co-founder and CEO Vlad Tenev said, “Even though we have made investment easier, we recognize that it’s a game. “
“I am confident that the easy-to-use interface allows customers to understand, control and manage their finances in a meaningful way,” Tenev also said in evidence.
Toomey said he appreciated how stock trading platforms like Robinhood have created a new class of investors.
“I think the democratization of these markets has been very good. Zero commissions, offer is very narrow [spreads] means that retail investors can buy into stocks in a way they never could before. Being able to buy a fraction of an allotment, for example, “said Toomey.
There is more American participation in the stock market, Toomey said, “very, very good.”
The rise of the retail trader has been a particular focus since January, when shares of GameStop went on a meteoric rise after investors in online forums ran into the stock that was heavily traded. face bet and cause short pressure.
Short sellers borrow shares of stock and then sell them back to the market, with the goal of buying them back later at a lower price. They then return the borrowed shares and make a profit from the difference. When the opposite happens, as with GameStop, shorts try to reduce their losses by buying the stock back at higher prices.
That activity, coupled with an aggressive purchase of GameStop shares and call options from a horde of other investors, helped push the video game vendor’s stock from less than $ 20 in early January to an intraday high of $ 483 on 28 January.
GameStop shares fell to below $ 40 by mid-February, although the stock has rallied again recently and was back over $ 200 apiece during Tuesday’s session.
Among those buying and selling shares of GameStop at the end of January was one of Toomey ‘s children. According to Senate Financial Releases, one of his children bought between $ 1,001 and $ 15,000 worth of GameStop shares on Jan. 27 and sold out of the situation outright on Jan. 28.
In a statement to Insider, which reported the proceedings last month, Toomey said he was unaware that one of his sons was trading in GameStop at the time. Insider identified the child as college-age Patrick Toomey III.
“If my son had asked me for advice on these trades, I would have told him the same thing I said in several print and television interviews: that it is a classic bubble that ends badly for most -part participants, “Toomey said in a statement to Insider.