REUTERS / Brendan McDermid
- Robinhood was asked last week for a $ 3 billion deposit to cover trading risks on highly volatile stocks.
- That’s why the brokerage imposed trade restrictions last week, CEO Vlad Tenev told Elon Musk.
- After Robinhood traded the retailer, the clearing house reduced the figure to $ 700 million.
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Robinhood has placed restrictions on trading after a security statement asked brokers to $ 3 billion to back up trading in GameStop and other volatile stocks offered by Reddit, CEO Vlad Tenev said in a live stream on Monday. Clubhouse told Elon Musk.
Musk introduces Tenev on the show as ‘Vlad the stock impaler’ and asks him to explain what exactly happened to Robinhood. “What happened last week? Why couldn’t people buy the GameStop shares? The people are demanding answers and they want to know the truth,” he said.
Tenev said the National Securities Clearing Corporation (NSCC) submitted an unusual request early Thursday morning to devise a $ 3 billion deposit to cover the trading risk.
That was not something Robinhood could do, because at the time, the stock exchange app was raising only $ 2 billion in venture capital.
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Musk further grilled the CEO, asking, “Did you sell your customers along the river, or did you have no choice?”
Tenev explained that the cleaning house’s request was “about a larger order than usual.” But after Robinhood agreed to restrict retail investors from making further purchases of highly volatile stocks, the NSCC agreed to reduce the figure to $ 700 million early Thursday. The company explained its settlement process in a statement on Saturday.
Robinhood and other brokers are required to keep accounts with the cleaning agencies. The minimum deposit required increases as the risk increases, hence the requirements for a capital infusion.
Tenev said Robinhood raised more than a billion capital in 24 hours last week to weaken trade restrictions. At the same time, he expressed regret over the limits it had set. “We knew it was a bad outcome for customers,” he said. “People get really angry when they hold shares and they want to sell and can’t.”
On Monday, the broker reduced the list of restricted shares to 50 from 50.
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