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- Robinhood’s CEO said the trading platform doesn’t monitor social media discussions about the stock market.
- The GameStop frenzy was largely fueled by social media sites like Reddit.
- The Nasdaq monitors social media in order to spot market manipulation.
- Visit the Business section of Insider for more stories.
Robinhood CEO Vladimir Tenev said Thursday the trading platform does not monitor social media discussions on stocks, despite the GameStop rally that gained traction on Reddit.
“We simply don’t have the data that the social media platforms have at their disposal to tie these posts to identities,” Tenev said during a Congressional hearing on January’s GameStop trading frenzy.
The House Committee on Financial Services called the hearing after an army of investors fueled by a sub-Reddit group, WallStreetBets, caused GameStop’s stocks to surge, burning hedge fund managers that had shorted the stock. Many Redditors were using Robinhood to buy GameStop shares.
Congressman David Scott, D-GA, posed the question of social media moderation.
“This episode exposes a serious threat to our financial system,” Scott said. “When tweets, social media posts, do more to move the market than material legitimate information, the risk is enormous,” he said.
Robinhood's role as a commission-free trading platform - one targeted toward everyday people who may not be educated about the stock market - was a major focus of the hearing. Tenev said Robinhood works to combat misinformation on social media by educating traders on its platform through a learning portal, which had over 3.2 million visitors in 2020, according to Tenev.
Reddit CEO Steve Huffman also responded to Scott's question about social media moderation. He emphasized Reddit's "anti-evil team" - an effort to moderate users interactions on the site, as well as eliminate the distribution of false information.
While Tenev did not say whether the company plans to start monitoring social media posts in the future, other stock market players have taken an interest in social media.
In January, Nasdaq CEO Adena Friedman said the exchange tracks social media chatter. Friedman did not go into detail regarding the technology the exchange uses, but said the Nasdaq can match unusual trading moves with social media activity.
Social media has impacted the stock market in the past, but none to the extent Wall Street saw last month during the GameStop trading frenzy. Outside of Reddit, the movement quickly gained popularity on other social media sites, including TikTok where users turned to learn more about the stock market.
Public figures on social media have also been known to move the market, most notably Tesla CEO Elon Musk. On January 26, Musk tweeted "Gamestonk,"sending GameStop's stock surging another 157% when the market reopened the next morning.
Musk has also impacted the value of Tesla shares, as well as digital currencies like Bitcoin and Dogecoin through his tweets.