Friday 29th January 2021
Online broker under fire
Robinhood just wanted to "protect" investors
The online broker Robinhood finds it difficult to explain. After it became known that the securities trading app was restricting the sale of Gamestop shares, Robinhood boss Vlad Tenev now explains: The company only wanted to protect its customers.
After the online broker Robinhood decided to temporarily ban the purchase of shares in Gamestop and twelve other shares, Robinhood boss Vlad Tenev is now practicing damage control. "We had to protect our company and our customers," Tenev told the US stock exchange broadcaster CNBC. "It pains him that Robinhood had to enforce these restrictions. He defended the practice by saying that the online broker is always open to" everyday investors and gives them the opportunity to trade whatever they want commission-free ".
When asked if Tenev believes Gamestop stock "is disconnected from reality," he replied, "I think people need to be informed. They need to be educated. I think access is a very powerful thing. The more individual investors have access to the markets, the better we will be. "
The securities trading app is accused of restricting trading to protect wealthy investors and hedge funds at the expense of retail investors. Small investors have been joining Gamestop since mid-January and have ensured that its market value has increased 17 times. Investors duel with professional investors who had bet on falling prices and for whom billions are likely to be at stake. In this week alone, this has driven the game stop rate from 75 to at times 380 dollars.
The systems of online brokers have recently reached their limits due to the high trading volume. Tenev told CNBC that Robinhood was struggling with liquidity problems. The startup has capital requirements from the Securities and Exchange Commission and deposits with clearing houses, which can vary depending on the market environment. "Some of these requirements fluctuate with market volatility and can be significant in the current environment."
After the storm of outrage and initial complaints from investors who see themselves being driven out of price gains, Robinhood announced that it would ease the trading restrictions on the securities again. The shares of Gamestop then rose in after-hours trading by over 70 percent. The papers of other companies, such as the smartphone pioneer Blackberry, for which restrictions also applied, also grew strongly.
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