Robinhood, Citadel execs to testify in front of Congress

Yahoo Finance’s Jared Blikre joined Yahoo Finance Live to discuss the latest GameStop news as Robinhood and Citadel executives are slated to testify in front of congress.

Video Transcript

SEANA SMITH: We have just under 20 minutes to go until the end of the trading day. And as we wrap up the week, the stock market, though, is mixed. You can see the Dow barely lower, right around the flat line. We'll see if we can flip it over into positive territory in the final couple of minutes. S&P and NASDAQ, though, in the green. In terms of sectors, energy, financials and materials leading the way today. Utilities the biggest laggard.

Let's look over to GameStop and some of these other meme stocks because we have been talking about them nonstop, it feels like, over the last couple of weeks. Next week, though, is going to be a big week for some of these names, as we start to get some of these hearings underway down in Washington, DC. We want to bring in Jared Blikre for a little bit more on this. And Jared, I guess, what should Reddit traders know ahead of next week's congressional hearing?

JARED BLIKRE: Well, first, there's going to be a lot of hype around them and all kinds of vested interest. Citadel is going to be represented there. The chief of Reddit, which is a private company.

And just taking stock of the entire situation, I think it's important to take a step back and really take a look at some of the underlying issues in the market that could be addressed. Because there's going to be a lot of talk about whether it's a pump and dump scheme and whether or not Game-- or excuse me, whether or not Robinhood should have been able to stop customers from trading additional shares of GameStop and some of these other stocks. That's all well and good, but how did we get here in the first place?

So my first point is, when it comes to opening new accounts for customers-- and a lot of these customers are brand new, entering the retail space, entering the trading space for the first time. Some of them get options accounts. And is it wise to do that in the very beginning? I would say probably not. So I think Robinhood and other retail trader-- and other retail brokerage firms should be forced to disclose their suitability policies and really reassess whether or not it's a good idea to give newer traders access to leverage.

Secondly, payment for order flow. This is a huge moneymaker. There are a lot of big stakes in it. You've got to step back and ask yourself, is this a viable business model? Is it harming traders? Because if there's so much money in it, where is it coming from? Is it simply coming out of nothing? Or is it a zero sum game, which is that it could have been going to the customers themselves or somebody else? I think it reveals deep, flawed inefficiencies in the market.

And this leads me to my third point. The market itself was kind of revised and changed in 2005 with the advent of Reg NMS, where we have all these exchanges competing with each other to trade the same set of stocks. And it's so fractured. And at times, the data is so bad and it lags so bad for the retail traders that it puts retail traders at a disadvantage. Hedge funds have incredible-- devote incredible amounts of money to buying premium data and the fastest data feeds. So I think the national bus-- excuse me, national best bid offer and that whole Reg NMS structure needs to be revisited. Guys.

SEANA SMITH: Certainly going to be an exciting week next week down in DC. All right, Jared Blikre, thanks so much for filling us in on--