Home screen of the Robinhood website
Photographer: Gabby Jones / Bloomberg
Photographer: Gabby Jones / Bloomberg
Robinhood Markets, the popular investor trading app behind the wildest stock market fluctuations this month, has cut some of its lines of credit with banks, according to people familiar with it.
One person said the firm has raised at least several hundred million dollars. The company’s lenders include JPMorgan Chase & Co. and Goldman Sachs Group Inc., according to data compiled by Bloomberg. Representatives of Robinhood and these banks declined to comment.
Backstage rushes to bolster Robinhood’s finances add to signs that the latest market havoc is putting pressure on the company, which has signed crowds of retail investors for its implementation during the pandemic. The firm is among the brokers that slowed trading in shares of GameStop Corp i AMC Entertainment Holdings Inc. Thursday sparked outrage among customers. Robinhood also told users it could close some of its positions as it takes steps to reduce account risks.
“As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearing house deposits,” Robinhood told blog post Thursday. “Some of these requirements fluctuate depending on market volatility and can be substantial in the current environment. These requirements exist to protect investors and markets and we take our responsibilities to meet them seriously, even through the measures we have taken today “.
Extreme volatility “generated substantial risk” for brokers, imposing stricter requirements on these companies, according to the Wall Street Clearing House DTCC.
“As volatility increases, portfolio margin requirements also increase,” he said in a statement emailed Depositary Trust & Clearing Corp.
Read more: Reddit Stock Mayhem “generated substantial risk” for brokers
With its easy-to-use application and commission-free operations, Robinhood grew rapidly in recent years and even more so during the pandemic, becoming the preferred platform for legions of people who turn to stock markets to make money. and spend time during blockages. For months, the firm is expected to make a first public offering this year.
But this month’s drama over rising GameStop and AMC prices, coordinated by Reddit investors, has put Robinhood at the center of the controversy. The company said after the close of US trading on Thursday that it will allow “limited purchases” to resume in certain affected stocks.
Robinhood has relied on its credit with banks to deal with the turmoil before. In March, the firm withdrew an entire $ 200 million facility from a trio of lenders, people familiar with the matter said at the time, while the coronavirus pandemic caused a flood of transactions and sharp market fluctuations. , during which the Robinhood trading platform suffered repeated outages.
– With the assistance of Misyrlena Egkolfopoulou
(Updates with clearinghouse comments from the fifth paragraph.)