After enduring a day of beating on social media, government, and the various app stores of the mobile world, Robinhood has started its own blog e Twitter account of the CEO to explain why he stopped trading some stocks today.
The fact that Robinhood restricted trading in a number of stocks came as a bombshell after the consumer trading platform became synonymous with not only an increase in retail investment, but also a risky gamble by some individuals. investors to push the shares of heavily shorted companies, including GameStop, AMC and other superiors. Speculation that Robinhood was limiting those users' trading capacity for wanting to pick your poison, Citadel, the US government, hedge funds, Janet Yellen or others, was rampant.
But none of this was true, at least according to Robinhood's account. In his post, Robinhood wrote that (ProWellTech emphasis):
[a]In the midst of this week's extraordinary market circumstances, today we made a difficult decision to temporarily limit the purchase of certain stocks. As a brokerage firm, we have many financial requirements, including SEC equity obligations and clearing house deposits. Some of these requirements vary with market volatility and can be substantial in the current environment. These requirements exist to protect investors and markets and we take our responsibilities to seriously comply with them, including through the measures we have taken today.
It appears Robinhood ran out of capital and had to make some tough decisions, quickly. The stocks its users wanted to trade likely generated the highest capital requirements given the volatility they demonstrated and the time it took for trades to settle, so Robinhood had to close some trades to stay on the right side of its needs of capital. (Not great, not terrible?)
Bloomberg reports indicate that Robinhood "tapped at least several hundred million dollars" from credit lines today makes sense in this context. As well as the unicorn's decision to allow some trading of the aforementioned securities in the near future ("starting tomorrow, we plan to allow limited purchases of these securities," the company wrote); now recharged with more capital, Robinhood can afford to get its users back, a little, to work.
Of course Robinhood could have been clearer about all of this earlier in the day. Instead, unfairly or not, it became the face of theoretical corruption and other nefarious forces. (Here's a hint, if your theory sounds like it could enter Qanon's orbit, try again?)
Nothing is solved. Congress has its problems. Other trading platforms also had to suspend trading in GameStop and other stocks for a period. Social media is pissed. Some Robinhood users were forced to liquidate positions. And somehow GameStop ended the day worth over $ 196 per share. And after closing time it was up $ 72.40, or 37.40% to $ 266 per share.
Who knows what will come next. But grains of salt, please, as we continue this bizarre adventure.
