After Robinhood and other brokerages restricted trading on GameStop shares and other soaring equities popular among retail traders, investors and lawmakers are looking for answers. Robinhood has reportedly raised $1 billion of additional funding from investors, and drew down several hundred millions of dollarsfrom credit lines, according to the reports.
In interviews on CNBC and Bloomberg, Robinhood CEO Vladimir Tenev referenced financial requirements, including the SEC’s net capital obligations and clearinghouse deposits, as reasons for restricted trading and raising more cash. The company said the decision was not at the direction of market makers Robinhood routes trades to.
“The market volatility increases the deposit requirements at various clearinghouses we have to deposit into. The more cash we have available to deposit at these clearinghouses, the more we can allow customers to buy these stocks unrestricted,” Tenev told Bloomberg.
In a note to the Wall Street Journal, DTCC, which runs the clearinghouses for U.S. stocks and bond trades, said trading in GameStop and others “generated substantial risk exposures at firms that clear these trades.” Webull and other brokers told the Journal that trading restrictions stemmed from mandates from their clearing firm.
Lawmakers on both sides of the aisle, including Representative Alexandria Ocasio-Cortez of New York and Senator Ted Cruz of Texas, chastised the decision to limit traders from buying GameStop stock.
GameStop restrictions have been lifted across various brokers Friday. Representative Maxine Waters, a Democrat from California and Senator Sherrod Brown, a Democrat from Ohio, both stated plans for hearings on what’s happening in the stock market.