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Dough CEO Victor Jones joined Yahoo Finance Live to analyze decisions made by Robinhood and other trading apps to limit trading in certain stocks.
Video transcript
SEANA SMITH: Dough, at first, chose not to restrict access to these very short names, as some of your competitors have.
VICTOR JONES: Right.
SEANA SMITH: I understand there was a brief disruption to your platform yesterday due to the temporary closure of the clearing company only. But just help us better understand, I guess, the last 24 hours from your perspective and the decisions that were made.
VICTOR JONES: Yeah. Look, we’ve said – and we’ve tried to communicate with our clients as often as possible our position on this. We believe in free and fair markets, and we don’t believe in this as a catchy marketing slogan. We believe in it as a principle. And we had some tough decisions to make, but we stuck to those principles yesterday. And it’s true that we wanted – we chose to allow trading of those underlying names.
And we feel, with our education and with our support, the fact that people can reach us in under two minutes, the fact that we do two hour live broadcasts to articulate really clearly what a shorts phenomenon is. -squeeze, which is short of interest, and help people understand that if you step away from the hype for a second, let’s remind ourselves what these companies are. When was the last time you went to the movies? When was the last time you bought a pair of Koss headphones, and when was the last time you bought a physical cartridge or game and traded in new and used video games?
So I think, you know, we’ve done our part to solve this problem through education. And I think there were a lot of people who were just trying to -, you know, really articulate the really difficult factors in decision making, and there are a lot of them, aren’t there? Capital structures, capital requirements, business risks. But at the end of the day, customers want to be heard here. And this generation, you know, shares everything.
ADAM SHAPIRO: Victor–
VICTOR JONES: They share their cars. They share their homes. And they feel that some people don’t share the wealth here.
ADAM SHAPIRO: So quick question for you – help us figure it out. Because my eyes, I’m getting – it’s like algebra again when I’m trying to understand options trading. At some point, the short squeeze ends because those who borrowed replaced the stocks. Short-term interest is extinguished because those who you know are entering into sales contracts won’t be so eager to go. And the call options are going to have to expire because at some point you won’t need to replace the stocks that you borrowed. Can’t you measure when this is going to happen and when the phenomenon with GameStop ends?
VICTOR JONES: You can. I think, really, a lot of people are looking at option risk. You pin the risk on the board. So I think a lot of brokerage firms are looking at this, and it probably informed a lot of their decisions. For us, 90% of the activity under this underlying name was on the equity side. And although our activity increased, the reality was that people were more upset that they couldn’t trade these underlying names than they wanted to. And so we actually – as the ink – activity – excuse me – was increasing, we’re only talking about 1,000 orders in the last two days.
JARED BLIKRE: Hi, Jared Blikre here. I just wanted to get your take on the margin and leverage built into the system here. Previously, you could open a margin account, and you had to have $ 50,000. Now you can do it with virtually nothing. What is your company’s take on leverage? How freely are you distributing it, and are you reviewing any of these strategies here?
VICTOR JONES: Well, here’s the way we – again we approach this, which is that you can use options for speculation. You certainly can. You can also use them for risk mitigation strategies.
I mean, how many people are on this program and talking about stretch valuations here at these particular levels? And there is a way to look at the options market and say I may have some upside potential here. And if we have a significant correction, which a lot of people have talked about, then my downside risk is much less.
It’s how we talk about using options strategies, and it’s what sets us apart. We don’t want people to come and just, you know, really look at the markets as a short term lifestyle change. We want people to treat markets as long-term wealth creation, and that’s why we created the company and our principles, and our priorities, as we did. And if you’re not there with customers, if you don’t support them, you aren’t able to answer questions in a timely manner, you kind of leave them to their own devices or you just leave them. to internet influencers, you send them to message boards. And I think that’s why it’s important that education is the guiding principle of how you introduce new users to markets.
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