(Reuters) – Online broker Robinhood, one of this week’s hottest retail locations, said it imposed temporary purchase restrictions on a small number of securities as clearing-imposed stock deposit liabilities increased tenfold.
“… the required amount we had to deposit at the clearinghouse was so great – with individual volatile securities representing hundreds of millions of dollars in deposit requirements – that we had to take steps to limit buying those volatile securities to ensure that we were more than able to meet our requirements, ”a blog post said late on Friday.
Robinhood’s free and easy-to-use app has made it popular with a new generation of small merchants, and its restrictions on Thursday led to a severe backlash from high-profile politicians and celebrities.
Retail investors using Robinhood and other apps triggered the so-called ‘Reddit rally’ that pushed up the shares of GameStop Corp and other companies defending on social media platforms, including Reddit, resulting in heavy losses for large hedge funds holding the stock gone short.
Reporting by Rama Venkat in Bengaluru; Editing by Raju Gopalakrishnan