By limiting negotiations, it was able to reduce the cash cushion, or margin, that its clearing house should maintain. The company eased some of those restrictions on Friday and on Monday it reduced the number of companies with commercial restrictions from 50 to eight.
The limits to Robinhood’s trading sparked a furious outcry among small investors, who claimed that the very application that had democratized trading was now being sold by Wall Street.
And the news that Robinhood had raised $ 2.4 billion so he could ease restrictions on negotiations did not impress William Moyer of North Carolina. “It’s just them trying to cover their asses,” he said. “They realized last week that they screwed up and are now trying to make amends by saying they have the money to do all of these negotiations now.”
Moyer, a 26-year-old automotive services consultant who bought shares in GameStop, Nokia, AMC and BlackBerry in the past two weeks, said he was offended by Robinhood’s decision to restrict trading on the platform. “I had to suffer during 2008 with my family,” he said, referring to the 2008 financial crisis. “I feel that this is just another way for big banks to show that they control everything we do,” he said. “They are just trying to stop us from really increasing our wealth as individuals.”
Robinhood’s decision to restrict trading in shares also caught the attention of lawmakers from all ends of the political spectrum. Congresswoman Alexandria Ocasio-Cortez, Democrat of New York, called “unacceptable.” Senator Ted Cruz, a Republican from Texas, retorted with her agreement.
Lawmakers hope to hold hearings to examine Robinhood’s role in the January market fluctuations.
“I want to make sure that we understand what happened there,” said Sen. Pat Toomey of Pennsylvania, the new Republican on the Senate Banking Committee, during a Monday morning appearance on CNBC about the decision to restrict business.
Congresswoman Maxine Waters, a California Democrat who is chairman of the House’s Financial Services Committee, said last week she would hold a hearing on short selling, as well as “online trading platforms” and “gamification”. On Monday, the committee announced that it would hold a hearing on the GameStop issue on February 18.