Thorough Chief Executive Officer Victor Jones joined Yahoo Finance Live to break down the decisions Robinhood and other trading programs made to restrict the trading of certain stocks.
Video transcription
SEANA SMITH: Dough initially chose not to restrict access to these heavily abbreviated names, as some of your competitors did.
VICTOR JONES: Right.
SEANA SMITH: I understand that there was a brief interruption on your platform yesterday because the cleaning company was only going to close temporarily. But help us to better understand the past 24 hours from your point of view and the decisions that have been made.
VICTOR JONES: Yes. Look, we said – and we tried to communicate our position on this to our customers as often as possible. We believe in free and fair markets, and we do not believe in them as a catchy slogan. We believe in it as a principle. And we had difficult decisions to make, but we stood on these principles yesterday. And it is true that we wanted – we chose to allow trading in these underlying names.
And we feel, with our education and with our support, the fact that people can get their hands on us within two minutes, the fact that we do two hours of live streams to really articulate what a short-press phenomenon is, which has a short interest, and helps people understand that if we step away from the hype for a moment, we need to remember what these businesses are. When was the last time you went to a movie theater? When was the last time you bought a pair of Koss headphones, and when was the last time you bought a physical cartridge or game and traded in new and used video games?
So I think we did our part to address this through education. And I think there are a lot of people who have tried to really articulate the very difficult factors in decision making, and there are many, right? Capital structures, capital requirements, trading risks. But at the end of the day, the customers here want to be heard. And this generation, you know, shares everything.
ADAM SHAPIRO: Victor–
VICTOR JONES: They share their cars. They share their homes. And it feels like some people are not sharing the wealth here.
ADAM SHAPIRO: So quick question to you – help us to understand. Because I get my eyes, it’s like algebra again when I try to trade options. At some point, the short press comes to an end because those who borrowed have replaced the shares. Short-term interest dies because those who, as you know, enter into sales contracts will not be so eager to go there. And the call options will have to expire because at some point you will not have to replace the shares you borrowed. Can’t measure when it’s going to hit and that means the phenomena with GameStop are coming to an end?
VICTOR JONES: You can. I think a lot of people really look at their option risk. You put risk on the board. So I think a lot of the brokerage firms are looking at that, and it probably spurred a lot of their decisions. For us, 90% of the activity in this underlying name comes from the inventory side. And although our activities increased, the fact that people were more upset because they could not trade the underlying names, but actually the desire for it. And so we – while the ink – the activity – excuse me – increased, but in the last few days only talked about maybe 1,000 orders.
JARED BLIKRE: Hello, Jared Blikre here. I just wanted to get the margin and the leverage in the system here. It used to be that you could open a margin account, and you had to have $ 50,000. Now you can do it with virtually nothing. What does your business take on leverage? How freely do you hand it out, and revisit any of these strategies here?
VICTOR JONES: Well, here’s the way we – again, we approach this topic, namely that you can use speculation options. You certainly can. You can also use it for risk mitigation strategies.
I mean, how many people come to this program and talk here on record valuations at these specific levels? And there is a way to look at the options market and say: I can underscore some potential here. And if we have a significant correction, which many people have talked about, then my disadvantage capital risk is much less.
This is the way we talked about using option strategies, and this is what sets us apart. We do not want people to come in, and just, you know, really look at the markets as a way to change lifestyles in the short term. We want people to treat the markets as long-term wealth creation, which is why we have created the business and our principles, as well as our priorities, in the way we have. And if you are not there with the customers, and if you do not give them support, you can not answer questions in time, you kind of leave it to themselves or you leave it to internet influencers, you leave them to message boards. And that’s why I think it’s important to have education as the guiding principle of how you introduce new users to the markets.