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Robinhood is prepared to apply pressure key pieces of legislation that if passed could influence their business model.
The stock market start-up registered its internal team to start putting pressure on February 5, according to a new registration report revised by CNBC.
The presentation gives a first glimpse of what legislation the start-up plans to target after Joe Biden becomes president and Democrats take control of Congress. Some bill report invoices could negatively affect Robinhood’s revenue model to profit from customer transactions.
One of the bills Robinhood plans to address is the Wall Street Tax Act of 2019. It was introduced by Rep. Peter DeFazio, D-Ore, and Sen. Brian Schatz, D-Hawaii, two years ago. with the aim of imposing a special excise tax of 0.1% on certain financial transactions, including the purchase of shares, bonds and derivatives.
The imposition of a bargaining tax has been raised as a way to cushion some of the frantic activity that has been seen in recent weeks. Less exchange could affect the profits of Robinhood and other large online brokerage firms.
While not charging in advance, Robinhood and the rest of the industry rely on what is known as order flow payment rather than commissions. Market makers, such as Citadel Securities or Virtu, pay e-brokers the right to execute customer transactions. The broker is paid a small commission for the actions they take, which can add up to millions when customers operate as actively as they have in recent months.
Robinhood has become one of Silicon Valley’s most valuable private companies. It was last valued at $ 11.7 billion, with sponsors such as Sequoia and Andressen Horowitz. Despite the commercial chaos and setback in January, several venture capitalists told CNBC that the company is still on track to make a IPO in 2021.
A Robinhood spokeswoman declined to comment on the pressure plans.
GameStop control
Robinhood’s business model was attacked by lawmakers and some traders after the company and other brokers in late January restricted the purchase of volatile stock transactions, such as GameStop, to their platforms. Robinhood said it did not make the move due to any outside pressure and needed to limit trade due to the unprecedented warranty requirements of its clearing house.
GameStop’s share price had skyrocketed in late January after Reddit traders pushed each other to continue doubling stock buying and causing pain to hedge funds that had taken the other side of the trade. in short circuit. Since then, Robinhood has raised limits on trades.
Lawmakers from the two major parties criticized Robinhood after these restrictions. One of the first beards came from Rep. Ro Khanna, D-California, a progressive representing Silicon Valley, called for “more regulation and equality” in financial markets in a statement on the Robinhood measure. Representative Alexandria Ocasio-Cortez, DN.Y., and Mr. Ted Cruz, R-Texas, and Elizabeth Warren, D-Mass., Also exploited the company’s decision.
The Senate Banking Committee and the House Financial Services Committee plan to hold hearings in the coming weeks on recent trade restrictions on trading platforms like Robinhood. Vlad Tenev, CEO of the trading company, is expected to appear before the House committee on February 18th.
The two pressure groups featured in the new presentation are Beth Zorc, Robinhood’s associate general counsel, who has previous experience at Wells Fargo and the Senate Banking Committee, along with Lucas Moskowitz, the company’s deputy general counsel. Moskowitz’s previous work included a stint as chief of staff to former Securities and Exchange Commission chairman Jay Clayton.
Robinhood spent $ 275,000 under pressure in 2020, according to the Nonpartisan Center for Responsible Policy. The companies they hired put pressure on the SEC.
Another proposal Robinhood aims for is the Inclusive Prosperity Act of 2019. The bill was introduced two years ago by Rep. Barbara Lee, D-California, and Sen. Bernie Sanders, I-Vt. The hope of the legislation is to impose a special tax on the transfer of ownership of certain securities, including any participation in shares of a corporation.
A bill introduced by Rep. Patrick McHenry, R-Texas, is also under control by Robinhood, according to the pressure release report. The bill, which was introduced in 2020, seeks to “impose a limitation on taxation and fees on the transactions of certain participants in the securities industry and for other purposes.”