self-proclaimed Robinhood’s democratic financial app was temporarily burned on Thursday stop trading on GameStop shares and other shares favored by the WallStreetBets community on Reddit. But while critics have accused the stockbroker of preventing amateur investors from protecting large Wall Street firms from rising losses, Robinhood says the real explanation is much more boring: he simply couldn’t afford to keep up with the wave of meme stock trading.
You see, when you buy or sell shares, the stock market goes through an intermediate clearing house that ensures that everything is to share the risk. Clearing houses, which are registered and approved by the Securities Commission, record the transaction as well as collect and distribute payments once the buyer and seller have agreed on a price. It also applies deposit requirements, a form of risk management to protect itself in the process, which means that brokers must register a certain amount of collateral to ensure that their transactions pass. Apparently, Robinhood’s clearing house supported these deposit requirements this week, probably because it was frightened by the volatility of rising stock prices for GameStop, AMC, BlackBerry and other beaten companies, which Reddit users have set their sights on. to screw the fence. funds that bet heavily against them.
“To put this in perspective, just this week, our mandatory deposit requirements for stock-related deposits have increased tenfold,” Robinhood said in a blog post published late Friday. “And that led us to implement temporary purchase restrictions for a small number of securities that clearing houses have raised their deposit requirements.”
The broker also pointed out that he did not stop trading to affect retail investors. Speculation that Robinhood traded certain shares on behalf of hedge fund managers, the US government or other fat cats to preserve its financial interests has spread online since the company’s decision.
“Not because we wanted to stop people from buying these shares,” Robinhood continued. “We did this because the amount we had to deposit at the clearing house was so large – with volatile individual securities representing hundreds of millions of dollars in deposit requirements – that we had to take steps to limit buying those volatile securities to make sure they could comfortably meet our requirements. ”
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If true, it is unclear why Robinhood did not immediately come up with this explanation, instead allowing time for conspiracy theories to infiltrate online about corruption and nefarious plots to prevent amateur investors from banking on all this. Of course, speculation could still have arisen no matter what – after all, it’s the internet we’re talking about – but let’s leave this information out. and only claims that the decision was made “to protect investorsAs Robinhood did on Thursday, It is still suspicious as hell.
So to speak, Google has removed at least 100,000 negative reviews from Robinhood in the Google Play Store after angry users submitted tons of critical reviews and lowered the app’s rating. Robinhood’s restrictions also led to two lawsuits, one for alleged breaches of its agreement with customers and another for alleged violations of antitrust law, brought by the same lawyer who is currently teaching Alex Jones his ass in court. Congress he was even shot in the GameStonks drama and seems to be planning an investigation. The Securities and Exchange Commission is monitoring the situation also.
This bizarre saga seems far from over, so a belt in people. And invest wisely.