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Vlad Tenev, co-chief executive officer and co-founder of Robinhood Financial LLC, defends his company’s “proactive” measures to block GameStop buys on the wall street trading app. He claims that the company’s decision was not influenced by outside officials.
“We’ll continue to monitor the situation and may make adjustments as needed,” the company said in a blog. “To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to.”
Robinhood announced that it had blocked trading of GameStop, AMC, Bed, Bath & Beyond, BlackBerry, and other stocks, after Reddit’s r/WallStreetBets drove up prices to astronomical highs.
“Amid significant market volatility, it’s important as ever that we help customers stay informed,” the company stated. Robinhood later reversed course and said it would “allow limited buys of these securities.”
“We continuously monitor the markets and make changes where necessary,” Robinhood said in a company blog post. “In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AMC, $BB, $BBBY, $EXPR, $GME, $KOSS, $NAKD and $NOK. We also raised margin requirements for certain securities.”
Tenev denied that the company blocked these stocks because it doesn’t have enough cash on hand during an interview with CNBC.
Robinhood CEO Vlad Tenev speaks out after the company decided to restrict trading in GameStop and other stocks today. “In order to protect the firm and protect our customers we had to limit buying in these stocks,” he tells @andrewrsorkin. https://t.co/LsJ5iNjJAB pic.twitter.com/yJATy66TcZ
— CNBC (@CNBC) January 29, 2021
Tenev explained that Robinhood came to the conclusion based on complying with mandated financial requirements from the SEC.
Tenev exclaimed the ban was to “maximize within reason the funds we have to deposit at the clearing houses.”
The Robinhood CEO said it was the “correct” decision to limit the trading of the stocks.
“Of course Robinhood stands for everyday investors,” Tenev said. “From the very beginning we have stood for investors opening up access. It pains us to have had to impose these restrictions and we’re going to do what we can to enable trading in these stocks as soon as we can.”
GameStop shares doubled on Tuesday and then more than doubled again on Wednesday to $347.51, before dropping to $229 after Robinhood banned the stock on the trading platform. GameStop is up 1,250% through the first few weeks of 2021. Game Stop had been trading for $18 in recent times.
Since the situation broke, TD Ameritrade also “placed restrictions on some transactions” for GameStop stock.
“TD Ameritrade has not halted trading in any securities. We have placed restrictions on some transactions in $GME and other securities,” the company told ABC News in a statement. “Restrictions, which differ from security to security and are subject to change, may include actions like increasing margin requirements, or limiting certain types of transactions, like short sales and those that may involve unlimited risk.”
“It is not uncommon for us to make such decisions, which we consider on an individual basis, in the interest of mitigating risk,” TD Ameritrade claimed. “We have been adjusting our requirements for several days as we continued to see trends indicating unusual volume in an unprecedented market environment, which appear to be divorced from traditional market fundamentals. We have made what we believe to be prudent and appropriate decisions to place some limits on certain transactions for certain securities.”
“As a brokerage firm, Robinhood has many financial requirements, including SEC net capital obligations and clearinghouse deposits,” Tenev said. “Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.”
“Our customers and our mission to increase access to investing remain our priority,” wrote on Twitter. “That will never change. I am proud of all our staff for putting their heads together and working to immediately communicate to our customers what was going on.”
“I want to clarify a few things and also explain why Robinhood made the decisions it did to restrict purchasing of certain securities,” he continued. “As a brokerage firm, Robinhood has many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.”
“These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today,” Tenev stated. “To be clear, this decision was not made on the direction of any market maker we route to or other market participants.”
“Starting tomorrow, we plan to allow limited buys of these securities. We’ll continue to monitor the situation and make adjustments as needed,” Tenev wrote on Thursday night.
Our customers and our mission to increase access to investing remain our priority. That will never change. I am proud of all our staff for putting their heads together and working to immediately communicate to our customers what was going on.
— Vlad Tenev (@vladtenev) January 28, 2021
As a brokerage firm, Robinhood has many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment.
— Vlad Tenev (@vladtenev) January 28, 2021
To be clear, this decision was not made on the direction of any market maker we route to or other market participants.
— Vlad Tenev (@vladtenev) January 28, 2021
We cannot control, however, the lightning-fast spread of information and misinformation that takes place on social media, and for that I am incredibly sorry to our customers and staff for this.
— Vlad Tenev (@vladtenev) January 28, 2021