Robinhood raises $ 1 billion and will reopen GameStop stock purchases on Friday

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Amid complaints from customers, at least one lawsuit and growing criticism from lawmakers from both major parties, Robinhood announced that on Friday he plans to once again allow “limited purchases” of 13 titles he restricted on Thursday.

That crackdown came after a short subreddit-inspired squeeze caused stock prices to skyrocket for companies like GameStop, Nokia, AMC and Koss, and almost immediately the rumors focused on why this happened, or who decided to put a limit on negotiations. In this week’s episode of Podcast Engadget, Devindra and Cherlynn spoke with Mike Futter and a member of the subreddit r / WallStreetBets to discuss exactly what is going on.

Despite the denial of any deal with major Wall Street sponsors, there is still a widespread belief that the inability to buy these specific companies has been coordinated to harm retail stock brokers. In the meantime, some explanations were investigating what happened to the Wallstreetbets subreddit and the business model of a company like Robinhood, pointing out that its moves caused marketmakers and hedge funds to participate and potentially profit from the frenzy.

Appropriately appointed WeBull CEO Anthony Denier spoke to Yahoo Finance and said that temporarily restricting Koss, AMC and GameStop negotiations was not a “political decision” and instead had to do with “settlement mechanisms in the market”. As he explained, they have to finance each transaction with a central clearinghouse for two days, and the cost of the guarantee for WeBull’s clearing firm has become too expensive to cover the cost on behalf of the broker.

In a blog post, Robinhood said he made “a risk management decision” and stated in interviews that “We have SEC capital requirements and clearinghouse deposits … Some of these requirements fluctuate a little based on volatility of the market and can be substantial in the current environment, where there is a lot of volatility and a lot of activity concentrated on these names that have gone viral on social networks. ”

In response to reports that Robinhood used his credit lines, CEO Vlad Tenev said that his company had no liquidity problems and that “we withdrew these credit lines so that we could reasonably maximize the funds we have to deposit in the clearing houses. compensation.” The New York Times reports that Robinhood withdrew $ 500 to $ 600 million credit lines to meet lending needs and, separately, raised $ 1 billion in emergency financing on Thursday night to avoid having to put more limits in negotiations.

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