In accordance with Robinhood’s CEO, GameStop purchases are restricted to “defend the corporate and our clients”.
Vlad Tenev, CEO of Robinhood, said Robinhood’s attempt to stop trading certain speculative names is in the best interests of the company and its millions of users.
“In order to protect the company and our customers, we had to limit the purchase of these stocks,” Tenev told CNBC’s Andrew Ross Sorkin on Thursday evening.
“Robinhood is a brokerage firm, we have a lot of financial requirements. We have SEC net capital requirements and clearinghouse deposits. So this is money that we have to deposit with different clearing houses. Some of these requirements fluctuate significantly in the market and they can be in because of the volatility Given the current environment where there is a lot of volatility and a lot of concentrated activity in these names that have gone viral on social media, “Tenev said.
Tenev denied the firm had any liquidity issues, saying Robinhood had drawn on lines of credit as a proactive measure.
“We want to be able to enable our customers to be as unrestricted as possible in accordance with requirements and regulations,” said Tenev. “So we pulled these lines of credit so that we could maximize the funds we have to deposit with the clearing houses within a reasonable range.”
In the midst of a wild week of speculative retailing, Robinhood restricted trading in thirteen stocks, including GameStop and AMC Entertainment, on Thursday. The pioneer of free stock trading only allowed clients to sell positions in certain securities, not to open new ones, increased margin requirements and even said that it would automatically close some positions if the client ran the risk of not having the required collateral feature.
“We haven’t seen this level of concentrated interest rate market on a small number of names before,” Tenev said. “We believe you should be able to buy and sell the stocks you want.”
Robinhood then said after Thursday’s closing bell that it would allow limited purchases of restricted stocks on Friday.
The broker’s original decision met with outrage from his group of loyal private investors. However, Robinhood stated the move was taken to meet the SEC’s capital requirements for broker-dealers.
“We saw unprecedented interest because the funding was culturally relevant in ways never seen before,” Tenev said. “Of course, Robinhood is about everyday investors. From the beginning we advocated open access investors. It hurts us to have to impose these restrictions and we will do everything we can to get these stocks trading as soon as possible enable.” As we can. “
Tenev said Robin’s decision was not made under the direction of a market maker or hedge fund.
GameStop stock closed 44% on Thursday after Robinhood restricted trading and rose more than 60% after the close of business after the decision to ease restrictions.
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