He self-proclaimed The democratic financial application Robinhood was temporarily submitted to Thursday stop trade to GameStop shares and other actions favored by the Reddit WallStreetBets community. But while critics accused the stockbroker of enticing amateur investors to protect large Wall Street companies from rising losses, Robinhood says the real explanation is much more boring: it just couldn’t afford the pace to keep up with the meme trade.
You see, when you buy or sell stocks, the exchange goes through an intermediary exchange center that makes sure everything is to mutualize the risk. Clearing houses, registered and approved by the Securities and Exchange Commission, register trade, as well as collect and distribute payments once the buyer and seller agree on a price. They also enforce deposit requirements, a form of risk management to protect themselves in the process, which means brokers must issue a certain amount of collateral to make sure their transactions go through. Apparently, the Robinhood exchange center met those deposit requirements this week, probably because it was scared by the volatility of stock prices soaring by GameStop, AMC, BlackBerry and other battered companies that users of Reddit focused on its effort to clear coverage. funds that bet heavily on them.
“To put that in perspective, just this week, our mandatory equity-related deposit requirements multiplied by ten,” Robinhood told a blog post published in late Friday. “And that’s what led us to set temporary purchase restrictions on a small number of securities in which clearing centers had raised their deposit requirements.”
The broker also stressed that it did not close the trade to hurt retail investors. Speculation that Robinhood ran negotiations on certain shares on behalf of hedge fund managers, the U.S. government or other fat cats to preserve its financial interests has spread online since the company’s decision.
“It wasn’t because we wanted to prevent people from buying those shares,” Robinhood continued. “We did this because the required amount we had to deposit at the clearing center was so large, with individual volatiles representing hundreds of millions of dollars in deposit requirements, that we had to take steps to limit the purchase of these volatile values to ensure we could comfortably meet our requirements “.
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If true, it’s unclear why Robinhood didn’t come up with this explanation right away, instead leaving time for conspiracy theories to erase online corruption and nefarious plots to crack down on amateur investors who bank on all this. It is true that speculation would still have arisen no matter what (after all, this is the Internet we are talking about), but set aside this information and only claim the decision made “to protect investors“As Robinhood did on Thursday, it is still suspicious as hell.
Of course, Google has removed it at least 100,000 negative comments Google Play Store Robinhood after angry users submitted tons of critical reviews and downgraded the app rating. Robinhood restrictions also led to two class actions, one for alleged violations of its agreement with the customer and another for alleged violations of antitrust law, brought by the same lawyer he currently distributes Alex Jones ass in court. Congress it has even been stretched to the GameStonks drama and is reportedly planning an investigation. The Securities and Exchange Commission is monitor the situation too.
This bizarre saga seems far from over, so there are people. And invest wisely.