Dough’s CEO Victor Jones joined Yahoo Finance Live to analyze the decisions Robinhood and other trading apps made to limit trading in certain stocks.
Video transcription
SEANA SMITH: Dough, at first, chose not to restrict access to these very short names, as some of his competitors did.
VICTOR JONES: Right.
SEANA SMITH: I understand that there was a brief disruption to your platform yesterday because the clearing firm closed only temporarily. But help us to understand better, I think, the last 24 hours from your point of view and the decisions that have been made.
VICTOR JONES: Yes. Look, we already said – and we have tried to communicate our position on this as soon as possible to our customers. We believe in free and fair markets and do not believe it as an attractive marketing slogan. We believe that as a principle. And we had some difficult decisions to make, but we maintained those principles yesterday. And it is correct that we wanted – we chose to allow the negotiation of these underlying names.
And we feel, with our education and our support, the fact that people can contact us in less than two minutes, the fact that we are doing two-hour live broadcasts to clearly articulate what is a short phenomenon – close, which is short term and help people to understand that if you get away from hype for a second, let’s remember what these deals are. When was the last time you went to the cinema? When was the last time you bought a pair of Koss headphones and when was the last time you actually bought a physical cartridge or game and exchanged it for new and used video games?
So I think, you know, we have done our part to resolve this through education. And I think there’s been a lot of people trying to just– to, you know, really articulate the very difficult factors in decision making, and there are a lot, right? Capital structures, capital requirements, commercial risks. But ultimately, customers want to be heard here. And this generation, you know, shares everything.
ADAM SHAPIRO: Winner–
VICTOR JONES: They share their cars. They share their homes. And they think that some people are not sharing the wealth here.
ADAM SHAPIRO: So, a quick question for you – help us understand. Because my eyes, I understand – it’s like algebra again when I’m trying to understand options trading. At some point, the squeeze on sales comes to an end because those who borrowed replaced the shares. Short interest dies, because those who are, you know, entering into sales contracts will not be so eager to go there. And the purchase options will have to expire because, at some point, you will not need to replace the shares you borrowed. Can’t you measure when this will happen and when the GameStop phenomena come to an end?
VICTOR JONES: You can. I think, really, a lot of people are looking at the risk of their options. You assign the risk on the board. So, I think a lot of brokers are looking at this, and it probably fueled many of their decisions. For us, 90% of the activity in this underlying name came from the stock side. And although our activity has increased, the reality is that people were more upset because they were not able to change these underlying names than they really wanted to. And so, actually – while the ink – the activity – excuse me – was increasing, we’re just talking about maybe 1,000 orders in the past few days.
JARED BLIKRE: Hello, Jared Blikre here. I just wanted to know your opinion about the margin and the leverage built into the system here. In the past, you could open a margin account and needed $ 50,000. You can now do this with virtually nothing. What is your company’s opinion on leverage? How freely do you distribute this and are you revisiting any of these strategies here?
VICTOR JONES: Well, here’s the way that we– again, we address this topic, which is you can use options for speculation. You certainly can. You can also use them for risk mitigation strategies.
I mean, how many people come into this program and talk about ratings stretched here at those specific levels? And there is a way to look at the options market and say, I could get some potential value here. And if we have a significant correction, which many people have been talking about, my risk of negative capital is much less.
That’s how we talk about using option strategies and that’s what sets us apart. We don’t want people to come in and just, you know, really look at the markets as a way to change the lifestyle in the short term. We want people to treat markets as creating long-term wealth, which is why we created the company and our principles, as well as our priorities, the way we have done it. And if you’re not there with the customers, if you’re not supporting them, you can’t answer questions in a timely manner, you kind of leave them alone or leave them for internet influencers, you leave them on boards posts. And I think that’s why it’s important to have education as the guiding principle for how you’re introducing new users to the markets.