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Despite the denial of any deal with large Wall Street backers, it is still widely accepted that the inability to buy these specific companies has been coordinated to disadvantage retail traders. Meanwhile, some explanations dug into what’s happened with the Wallstreetbets sub-program, and the business model of a company like Robinhood, pointing out that their moves have caused marketmakers and hedge funds to also participate and potentially profit from the frenzy.
Rightly Appointed CEO Anthony Denier spoke with Yahoo Finance and said that temporarily restricting trading in Koss, AMC and GameStop was not a “political decision” and rather had to do with “the mechanisms of settlement in the market”. As he explained, they have to fund every transaction with a central clearing house for two days, and the cost of the guarantee for WeBull’s clearing company has become too expensive to cover the cost on behalf of their operator.
NEW: The CEO of Webull tells us that the decision to join Robinhood in restricting AMC and GameStop transactions came from soaring costs to pay for its users’ transactions:
“It was not our choice … it has to do with the settlement mechanisms in the market.”pic.twitter.com/Micz5U6SRc
– Zack Guzman (@zGuz) January 28, 2021
In a blog postRobinhood said he made “a risk management decision” and similarly stated in interviews that “we have SEC net capital requirements and clearing house deposits … these requirements fluctuate a bit depending on market volatility and can be substantial in today’s environment where there is a lot of volatility and a lot of activity concentrated in these names that have gone viral on social media. “
In response to reports that Robinhood had tapped into its lines of credit, CEO Vlad Tenev said his company had no liquidity issues and that “we have pulled these lines of credit down in order to maximize funds within reason. that we have to file with clearing houses. the New York Times Robinhood reports tapped into $ 500 million to $ 600 million lines of credit to meet lending needs, and separately raised $ 1 billion in emergency funds Thursday night to avoid having to impose new limits to transactions.
These requirements exist to protect investors and the markets and we take our responsibility to comply with them seriously, including through the actions we have taken today.
– VLAD (@vladtenev) January 28, 2021
From tomorrow, we plan to allow limited purchases of these securities. We will continue to monitor the situation and make any necessary adjustments.
– VLAD (@vladtenev) January 28, 2021
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