The Robinhood app on a smartphone.
Bloomberg | Bloomberg | Getty Images
Online broker Robinhood said it places a small number of securities temporary buy restrictions as the required deposit requirements for shares in Wall Street have increased tenfold.
The decision by Robinhood, a pioneer and free-to-trade app popular with small investors, has been under scrutiny by its customers over the past week.
“It was not because we wanted to stop people from buying these shares,” Robinhood published in a blog post late Friday.
‘We did this because the required amount we had to pay into the clearing house was so large – with individual volatile securities amounting to hundreds of millions of dollars in deposit requirements – that we had to take steps to limit the purchase of the volatile bonds to ensure that we could comfortably meet our requirements, ”it continued.
Amateur investors using Robinhood and other applications have offered shares that are very short-lived, rising 400% of GameStop shares over the past week, resulting in huge losses for hedge funds that have shorted the shares.
Robinhood initially told investors that they could only sell new shares in certain companies that attracted attention through Reddit and could not buy. The brokers allow clients to buy only a single share in GameStop. A total of 50 securities are now restricted to the stock trading app.