Wednesday, August 17, 2022

Robinhood or “stealing the” hood “? Growing outrage of the online broker | Financial market news

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Robinhood, a US-based online brokerage, has been one of the hottest places in this week’s retail frenzy, but its sudden restrictions on buying some hot stocks have raised anger customers, celebrities and politicians who argue that it unfairly benefits bigger investors.

The company has also operated a line of credit in order to have the necessary funds to ensure the continuity of trade when it lifts the rules.

Robinhood chief executive Vladimir Tenev said on Thursday that trade was restricted in “about 13” viral stocks, including GameStop, AMC Entertainment and American Airlines, in order to protect the company and its customers from volatility.

Those stocks slipped on Thursday, offsetting losses only after Robinhood said he hoped to lift curbs on Friday.

GameStop had jumped more than 40% on Thursday, momentarily pushing the stock above $ 500 a share. It has risen over 1,700% this year, raising a rally in retail across the board and leading some short sellers – traders betting a stock will fall – to throw in the towel.


Tenev told US financial news network CNBC that the brokerage had operated lines of credit “so that we can maximize, within reason, the funds that we need to deposit in clearing houses,” in order to further facilitate exchanges.

“We understand that our customers are upset, we are doing what we can to reactivate purchases under these names,” he said. “We want to be clear in communications, and I agree we should have been there a little earlier.”

While other companies such as Interactive Brokers have also restricted trading, Robinhood’s free and easy-to-use app has made it popular with a new generation of small traders and its restrictions have received the most reactions. heavy.

‘Keep your promise’

“Robin Hood? No you’re stealing the hood,” one user tweeted. “It’s crazy how much you’d rather watch your business burn down rather than keep your promise to provide users with free trade,” one commented. other.

Twitter users also complained that Robinhood appeared to be selling their shares without permission. Robinhood did not immediately say whether he had restricted sales, but Tenev said customers were allowed to sell, but not to buy.

Two clients have sued Robinhood Financial, seeking damages for trading stoppages in a series of actions.

The Bloomberg News Agency reported that the broker had mined at least several hundred million dollars from its lenders, including JP Morgan and Goldman Sachs, although Tenev did not discuss the size of Robinhood’s borrowing on CNBC. .

Meanwhile, anger has spread beyond the investment community, with American rappers and politicians on both sides of the aisle joining in the backlash.

“This is unacceptable,” Democrat Representative Alexandria Ocasio-Cortez tweeted.

“Now we need to know more about @ RobinhoodApp’s decision to prevent retail investors from buying stocks while hedge funds can freely trade stocks as they see fit.”

His tweet was shared by Republican Senator Ted Cruz who commented: “Totally agree”. Tesla founder Elon Musk, whose shares have also been a retail favorite, also commented on Ocasio-Cortez’s tweet, saying, “Absolutely.”

Robinhood did not respond to Reuters news agency requests for comment.

Celebrities also rang. “Yo that’s a ***** g crime what @RobinhoodApp does NOT SELL !!!” rapper Ja Rule tweeted.

Founded in 2013 with the mission of “democratizing finance for all” by offering commission-free transactions, Thursday’s decision was viewed by many as hypocritical. Many users shared a tweet from 2016 in which the company said, “Let people trade.”

“This has always been a potential issue with Robinhood,” said Ian Kar, co-founder and CEO of research provider Fintech Today. “When are you responsible for helping your users make sound financial decisions, rather than allowing them to trade freely?”

Robinhood experienced a business boom during the coronavirus pandemic as more and more homebound consumers began to buy and sell stocks online. The app now has more than 13 million users.

While its compelling service has made it attractive to millions of customers, it has also drawn the attention of critics and regulators who fear the company will encourage risky behavior among retail investors.


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