According to the brokerage firm’s executive director, the measure was taken on the basis of “market dynamics and clearing agent’s deposit requirements, as per the regulations”.
The director of online brokerage application Robinhood, Vlad Tenev, on Friday denied that the purchase of shares of retailer GameStop had been blocked under pressure from hedge funds.
“About that conspiracy theory I think again and again that I have said it is not true. Our decision to temporarily limit the purchase of certain securities by clients had nothing to do with a market maker or a participant in the market. Market or anyone who pressures us or asks us to do so, ”Tenev said in an interview with Yahoo Finance.
“It was all about the market dynamics and the requirements for clearinghouse deposits, according to the regulations,” said the businessman.
A day earlier, the same was said by Webull, another broker who turned off the purchase of GameStop titles.
“It was not our choice. Our compensation company called us and said we will have to stop accepting new positions in those titles,” said Anthony Denier, CEO of Webull.
Clearing houses are third-party institutions that are necessary to facilitate money transfers. However, they need a few days to complete surgery. In high volatility situations, this delay can cost the broker too much, Yahoo Finance explains.
- Robinhood blocked the purchase of the GameStop titles on Thursday when they hit an all-time high of $ 483
- In response, small investors presented a class action lawsuit against the app and received over 100,000 negative reviews within an hour
- People like US Congressman Alexandria Ocasio-Cortez and billionaire Elon Musk criticized the platform. There were also allegations that Robinhood was trading under pressure from hedge funds
- Robinhood lifted the ban on buying GameStop stock, however limited the number of titles that can be traded at a single share for retail customers
- According to reports, the application raised more than $ 1 billion in emergency funds on Thursday to continue to operate amid market volatility