![]() ![]() “But there’s a really good question of how paternalistic should the brokerage firm be?” ![]() “There’s definitely a history of this kind of paternalism,” Angel says. Restricting stock trades also isn’t unique Angel points out that many brokers don’t let customers trade in penny stocks without special authorization, for instance. In that interpretation, Robinhood is something like a bartender cutting things off before the party turns into a riot. “It’s become undeniable that massive retail trading is leading to some weird things happening in the market.” “When Robinhood sees a situation that they know is going to end really badly, they’re going to be worried that if they don’t do something, people are going to come back and say, ‘Why did you let me buy this stock at $300?’”įinancial experts universally agree that GameStop will eventually crash back to a price that reflects its actual fundamentals, and when it does, a lot of people are going to find themselves on the wrong side of that trade and lose a whole lot of money. “They’ve gotten a lot of criticism that it makes it too easy to trade, too much fun to trade,” says Jim Angel, who specializes in market structure and regulation at Georgetown University’s McDonough School of Business. On December 16, the state of Massachusetts accused Robinhood of “aggressively targeting young, inexperienced investors” and exposing them to “unnecessary risk.” It’s the latest in a long arc of accusations that Robinhood’s playful interface makes buying and trading stocks too easy and downplays the downside risk. “To be clear, this was a risk-management decision, and was not made on the direction of the market makers we route to,” Robinhood said of the restrictions it imposed on Thursday.Īnother complaint, filed around the same time as the SEC settlement, might be more instructive when it comes to Robinhood’s actions Thursday. The volume of trading suggests that some institutional investors may have hopped on as well. The higher the stock price rose, the more the shorts had to buy to cover their losses, turning a snowball into an avalanche. It goes like this: Traders on the WallStreetBets forums on Reddit and Discord, inspired by a new GameStop board member and the opportunity to squeeze short sellers like Citron Research, funneled their disposable income into shares of the beleaguered retailer. Understanding Thursday’s fracas requires a brief history of why GameStop shot up 1,700 percent this month. And while experts say that Robinhood was within its legal and regulatory rights to shut down the stonks party, its users are up in arms. You could still sell those stocks-most of which still rank among the most widely held on the platform, according to the Robinhood app’s frequently updated “Most Popular” list-but otherwise? No dice. That veneer has shown cracks over the years, but perhaps none so visible as this morning, when Robinhood users found themselves unable to purchase the so-called meme stocks, like GameStop and AMC, that the WallStreetBets community on Reddit had recently sent soaring. Since then, the number has jumped to 3 million.The online brokerage Robinhood launched in 2013 with an egalitarian pitch worthy of its namesake: commission-free trading on a platform that has the common investor’s interests at heart. On Thursday, the app had 2.4 million reviews. On Apple’s App Store, Robinhood had a solid four-star rating on Tuesday morning, but the number of negative reviews is growing. ![]() It added it had public guidelines outlining policies on app reviews and ratings and requesting users not post fake reviews intended to increase or lower ratings. Google said it had a way of identifying spam and abuse of the app-review systems, adding that it wanted trustworthy reviews in its Play store. ![]() This echoed an email Robinhood sent to members Monday that said: “We didn’t want to stop people from buying stocks and we certainly weren’t trying to help hedge funds.” In an interview with Tesla CEO Elon Musk on Sunday, Tenev said Robinhood had been forced to temporarily stop users from buying those stocks because the surge had resulted in a deposit requirement of $US3 billion from the National Securities Clearing Corp. Robinhood CEO Vlad Tenev told CNBC on Thursday that the trading app acted to protect itself and its customers. 100 million students now use Microsoft Teams, as exec says Google’s ‘Chromebooks are still faster and cheaper’ ![]()
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