GameStop’s trade restrictions lifted with further actions
The Robinhood investment app is seen on a smartphone in this photo illustration on June 24, 2020 in Washington, DC.
Jim Watson | AFP | Getty Images
The Robinhood stock trading app has removed temporary trading restrictions on all stocks, including GameStop and AMC Entertainment Holdings, after a tumultuous week for the markets.
The company posted an update on its website Thursday evening, stating: “There is currently no temporary limit to increasing your positions.”
Earlier today, Robinhood users were only able to trade 500 GameStop shares and 5,500 AMC shares, according to Reuters.
A wave of retail investors inspired by Reddit’s board, WallStreetBets, gathered in GameStop stocks and other heavily shorted stocks last week, causing huge losses for some hedge funds.
In an attempt to try to deal with the situation, Robinhood on Thursday restricted trading in some volatile stocks, including GameStop, Express, Koss and former phone makers Nokia and Blackberry.
Robinhood restricted trading to 13 stocks in total, allowing clients to sell positions but not open new ones in certain stocks, causing user fury.
On Sunday, Vlad Tenev, co-founder and co-CEO of Robinhood, used the Clubhouse invite-only audio chat app to defend the company’s decision to restrict trading, saying it was aimed at protecting the company and his clients.
At the Clubhouse conference, Tesla CEO Elon Musk asked Tenev why the platform, a pioneer in commission-free trading, decided to restrict trading.
“We had no choice in this case,” Tenev said. “We had to comply with our regulatory capital requirements.
Tenev said Robinhood’s operations team received a request at 3:30 a.m. PT last Thursday from the National Securities Clearing Corp. Robinhood and other brokers were required to meet certain deposit requirements from clearing houses like the NSCC on a daily basis. The amount required is based on factors such as the volatility and concentration of certain securities, Tenev said.
Robinhood received a request for a $ 3 billion security deposit from the NSCC to safeguard the transactions, “an order of magnitude larger than it typically is,” Tenev said. The company has raised an additional $ 1 billion in emergency capital from existing investors in an effort to strengthen its balance sheet and allow it to ease trade restrictions.
“Did something fishy possibly have happened here?” Musk asked Tenev. The Tesla chief showed his support for WallStreetBets on Twitter.
“I wouldn’t give it shade or anything like that,” Tenev replied. “The NSCC was reasonable after that.”
Robinhood and the NSCC then agreed to reduce the number from $ 3 billion to around $ 1.4 billion, but Tenev said his company was still under pressure to take action to limit transactions.
Asked by Musk if there would be other limits on trading in the future, Tenev said, “I think there will always be a theoretical limit. We don’t have infinite capital.”
Robinhood was not the only stock trading app to implement restrictions.
UK stock-trading app Freetrade told clients last Friday that it had disabled purchases of US stocks, but it lifted the restrictions earlier this week.
“There have been no restrictions on this for most of this week,” a spokesperson for Freetrade told CNBC. “There was only a brief window on Tuesday (a few hours) when shopping was turned off.”
– Additional reporting by CNBC’s Ryan Browne.