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FOX Business’s Kristina Partsinevelos explains what’s going on with the Robinhood brokerage app and how users have responded to the company’s trading restriction this week.
Embattled Robinhood CEO Vlad Tenev denied Friday that pressure from Wall Street hedge funds prompted the mobile brokerage firm to restrict transactions involving GameStop stocks as prices rose this week.
Robinhood has come under unprecedented scrutiny in recent days from critics including lawmakers in Congress and Barstool Sports founder Dave Portnoy, who alleged the platform halted trading in shares preferred by retail investors to protect the allies of hedge funds. In an interview with Yahoo Finance, Tenez called the allegations a “conspiracy theory”.
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“I think I have said over and over again that this is not true,” Tenev said. “Our decision to temporarily prevent clients from buying certain securities had nothing to do with whether a market maker or market player or someone like that was pressuring us or asking us to do so. . It was all about market dynamics and clearing house deposit requirements as per the regulations. “
Robinhood drew heavy criticism this week after temporarily applying purchase limits to several touted stocks on Reddit’s “WallStreetBets” forum, including GameStop, AMC Entertainment and Nokia. The day trading app resumed accepting purchases on Friday, but adopted a limit of one action per user at close of trade.
GameStop was one of the best-selling stocks on Wall Street before the sudden interest in the stock soared. The trading frenzy triggered a “short squeeze,” costing hedge funds that bet against stocks billions of dollars.
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Lawmakers on both sides of the political aisle, including Rep. Alexandria Ocasio-Cortez, D-NY, and Sen. Ted Cruz, R-Tx., Have called for an investigation into Robinhood’s decision. In a blog post, the platform said the restrictions were aimed at mitigating risk.
“I think if you look at this whole situation, it’s a new situation,” Tenev added in the interview. “A relatively small number of stocks have gone viral on the Internet. And as things that go viral on social media and the internet do, there is an exponential growth in interest. And so we have to be careful. And we have to have careful risk management. And that’s what the company did.
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