The Robinhood Investment app can be seen on a smartphone in this photo illustration on June 24, 2020 in Washington, DC.
Jim Watson | AFP | Getty Images
Stock trading app Robinhood has lifted temporary trading restrictions on all stocks including GameStop and AMC Entertainment Holdings after a turbulent week for the markets.
The company posted an update on its website late Thursday saying, “There are currently no temporary limits on increasing your positions.”
Earlier in the day, Robinhood users could only trade 500 GameStop shares and 5,500 AMC shares, according to Reuters.
A wave of retail investors, inspired by Reddit board WallStreetBets, piled up on GameStop stocks and other sharply shortened stocks last week, causing huge losses for some hedge funds.
To get the situation under control, Robinhood restricted trading in certain volatile stocks last Thursday, including GameStop, Express, Koss, and legacy phone makers Nokia and Blackberry.
Robinhood restricted trading in a total of 13 stocks so clients could sell positions but not open new ones in certain stocks, causing anger among users.
On Sunday, Robinhood co-founder and co-CEO Vlad Tenev used the invite-only audio chat app Clubhouse to defend the company’s decision to restrict trading, stating that it was aimed at promoting the company and its customers to protect.
In the clubhouse conversation, Elon Musk, CEO of Tesla, pressed Tenev on why the platform, a pioneer in commission-free trading, decided to restrict trading.
“We had no choice in this case,” said Tenev. “We had to meet our regulatory capital requirements.”
Tenev said the Robinhood operations team received an inquiry from the National Securities Clearing Corp. at 3:30 a.m. last Thursday. receive. Robinhood and other brokers have to meet certain deposit requirements from clearing houses like NSCC every day. The amount required is based on factors such as volatility and concentration in certain securities, Tenev said.
Robinhood received a $ 3 billion bond application from the NSCC to help secure business. “An order of magnitude more than usual,” said Tenev. The company raised an additional $ 1 billion in emergency capital from existing investors to prop up its balance sheet and ease trade restrictions.
“Did something shady go down here?” Asked Musk Tenev. The Tesla boss has shown support for WallStreetBets on Twitter.
“I wouldn’t ascribe any shadiness or anything to it,” replied Tenev. “The NSCC was sensible after that.”
Robinhood and the NSCC later agreed to cut the figure from $ 3 billion to around $ 1.4 billion, but Tenev said his company was still forced to take action to limit trade.
When asked by Musk if there would be more trade restrictions in the future, Tenev said, “I think there will always be a theoretical limit. We don’t have infinite capital.”
Robinhood wasn’t the only stock trading app that put restrictions in place.
UK stock trading app Freetrade told its customers last Friday that it had turned off buying US stocks but lifted restrictions earlier this week.
“There were no restrictions for most of this week,” a Freetrade spokesman told CNBC. “On Tuesday (a few hours) there was only a short window in which purchases were deactivated.”
– Additional coverage from CNBC’s Ryan Browne.