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Brian Cheung joins Myles Udland and Brian Sozzi to discuss the surge in Robinhood’s stock price due to a boost from retail traders.
BRIAN SOZZI: Switching gears a little bit, we're still watching Robinhood. I mean, it's up now, up double digits here in the pre-market up 25% yesterday. And you really, I think, put it perfectly on Twitter, Brian, more buyers than sellers, and that appears to be the case. The retail trade, just what I've been reading all morning, appears to be now underneath Robinhood really ever since Cathie Wood stepped up here and bought that stock.
BRIAN CHEUNG: Yeah, well I mean, again, we're a few days out from the IPO. Again, who's to say whether it goes up or down? Obviously these are kind of interesting movements, but I think broadly speaking, we have to talk about the new trend that we've been seeing in these IPOs. It's been historically the case, at least maybe four or five years ago, that when IPOs would come out, they would have the big pop on the first day of trading.
That hasn't been happening with a lot of these big, high profile IPOs. And whether or not that's because of the scale, is it because there's something unique about these unicorns when they take them public? Is it because the underwriting, the banks are just doing a different approach when it comes to maybe underwriting these types of IPOs? I think these are larger questions that really say, hey, is that expectation? I don't want to bring the Lucas critique into this, but--
- The what?
BRIAN CHEUNG: Is the expectation that IPOs often pop on the first day now busted because people have recognized that, that tendency--
BRIAN SOZZI: And it's happening without a major move in crypto. Crypto, for the most part, has been stable for a little bit. So this move is happening without Bitcoin going to 60,000.
MYLES UDLAND: Should we do the pricing-- the pricing thing? I don't want to do the pricing thing. The pricing thing is the most overplayed critique in conversation around the IPO market that you could possibly imagine. But look, I mean, you want talk about Robinhood? What was
Gensler really talking about yesterday, Brian? I think he's just discussing something that investors in the equity market and the bond market, but let's call it traditional institutional markets, something that they take for granted because they can because regulations say that you basically know who your counterparty is and what the counterparty risk that you are taking on is. The problem that Robinhood traders came into in January is their counterparty, Robinhood, ran into problems overnight that they didn't know about. That's why they weren't able to buy or sell GME or AMC in the proportions they wanted. They had a counterparty risk. And I think Gensler's basic point is that there are a lot of people, a lot of operations within the crypto market, where you don't have that same level of knowledge and that's something that he thinks the SEC needs to and should be able to step in on.
BRIAN CHEUNG: Yeah. And I think to be fair, we have to delineate that yesterday his remarks were mostly about crypto, but they are connected. Because when you hear that bit that we just showed you, he's saying, look, I don't care if you make a play that loses you a bunch of money.
MYLES UDLAND: Absolutely.
BRIAN CHEUNG: That is your right as an investor.
MYLES UDLAND: Absolutely.
BRIAN CHEUNG: Investor protection is not stopping you from taking a loss in a position.
MYLES UDLAND: Yeah.
BRIAN CHEUNG: What investor protection is, is making sure you don't get scammed or make sure that you don't get defrauded. Now when it comes to translating that crypto space into specifically payment for order flow, I think there's a lot of conflation, right? People are saying, oh, well, the SEC is going to try to crack down on PFOF. And honestly, from Gensler's watch, it sounds like he has really not much interest in maybe going beyond just studying the issue. I think, like you said, it's really about the clearinghouses. What is the DTCC's role when it comes to--
MYLES UDLAND: Right.
BRIAN CHEUNG: --these brokerages, because of specifically these high volumes that come as a result PFOF and another innovations.
MYLES UDLAND: Yeah. I mean, Coinbase and their IPO is outlining, and I think correctly, that crypto has gone through multiple price cycles and there will be future price cycles within that context. But along with those price cycles, we've seen various exchanges blow up, where-- whereas is the Bitcoin, it's gone.
Or, you know, where is-- where-- where is this stuff I pledge to you, central clearing house, that was supposed to have either my currency or help me clear my trades or find a counterparty for my trades? They just disappear. And I think that what Gensler is saying, is that, that's not going to be an acceptable long term answer of like, oh, sometimes the money is just gone. I mean, that was, that-- happened I guess 30, 40 years ago in US equity markets and they regulated that out, right? So it feels like that's how he's thinking about this issue.
BRIAN CHEUNG: Well, I mean, DeFi is going to be a big focus for that reason.
MYLES UDLAND: Right.
BRIAN CHEUNG: Right? Whether or not there are these tokens that are being exchanged. I mean, he was saying in his speech yesterday that there are tokens that he feels should secured-- that be registered that aren't registered and there are DeFi platforms that should be registered that aren't registered right now, and I think for those exact reasons, that's why. That may be a bigger focus than say the regulation of the securities themselves. That's fairly clear.
BRIAN SOZZI: And all of this is in the metaverse, guys.
BRIAN CHEUNG: Oh jeez.
BRIAN SOZZI: It's all in the metaverse.
BRIAN CHEUNG: This guy.
BRIAN SOZZI: All of it, the metaverse.
MYLES UDLAND: I feel like we just ran through everything that we have to talk about in the last 15 minutes.
BRIAN CHEUNG: Let's wrap it up.
MYLES UDLAND: Now we need to do and hour and 45 minutes--
BRIAN CHEUNG: Let's all-- let's go home.
BRIAN SOZZI: Good to see you.
BRIAN CHEUNG: Let's go home.
MYLES UDLAND: Let's be done. All right.