The self-proclaimed the democratic financial app Robinhood came under fire on Thursday for temporary stop trading on GameStop shares and other shares favored by Reddit’s WallStreetBets community. But while critics have accused the stockbroker of preventing amateur investors from protecting large Wall Street businesses from rising losses, Robinhood claims the real statement is much more boring: it simply could not afford to keep up with the stock market crash. meme not.
You see, when you buy or sell stocks, the stock market goes through an interim clearing house that makes sure everything is at risk with each other. Clearance houses, registered and approved by the Securities and Exchange Commission, record the trade, as well as collect and pay out payments once the buyer and seller have agreed a price. They also maintain deposit requirements, a form of risk management to protect themselves in the process, which means brokers have to place a certain amount of collateral to ensure their transactions go through. Apparently, Robinhood’s clearinghouse has raised deposit requirements this week, presumably because it has degenerated into the volatility of rising stock prices for GameStop, AMC, BlackBerry and other battered companies targeted by Reddit users in an effort to fence to illuminate. funds that bet a lot against them.
“To put this in perspective, these deposit-related deposit requirements have only increased tenfold this week,” Robinhood said in a blog post published late Friday. “And this is what has led us to impose temporary purchase restrictions on a small number of securities on which the clearing houses have increased their deposit requirements.”
The broker also stressed that it does not trade to the detriment of retail investors. The speculation that Robinhood is trading certain stocks on behalf of hedge fund managers, the US government or other fat cats to maintain their financial interests has been circulating online since the company’s decision.
“It was not because we wanted to stop people from buying these shares,” Robinhood continued. ‘We did this because the required amount we had to pay into the clearing house was so large – with individual volatile bonds 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. ”
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If this is true, it’s unclear why Robinhood did not immediately come up with this explanation, but that time for conspiracy theories was given time to fight corruption and ominous plans online to shut down the amateur investors who make up the bank in all this. fit. Granted, speculation would probably still crop up, no matter what – it’s the internet we’re talking about – but to omit the information and not claims the decision was made “to protect investors, ”As Robinhood did on Thursday, is still suspicious as hell.
To know, Google removed at least 100,000 negative reviews from Robinhood from the Google Play Store after angry users sent very critical reviews and the app’s rating sank. The restrictions on Robinhood have also led to two lawsuits, one for alleged breaches of his client agreement and another for alleged violations of antitrust law, brought by the same lawyer currently employed Alex Jones his hole in the court. Congress was even drawn to the GameStonks drama and apparently planning an investigation. The Securities and Exchange Commission is monitor the situation also.
This bizarre saga is far from over, so the people are stuck. And invest wisely.