The controversial decision by Robinhood to ban the purchasing of ‘meme stocks’ came in response to regulatory demand and not any backroom dealings, the platform’s CEO has told Tesla boss and world’s richest person Elon Musk.
Robinhood’s Vladimir Tenev has become one of the most sought-after interviewees for outlets covering stock market news, due to the role he played in the stand-off between large short-selling hedge funds and a crowd of small-dollar investors from the Reddit community WallStreetBets. But Elon Musk is arguably the most unusual person to do the interviewing.
The two met over audio chat app Clubhouse on Sunday evening to discuss how the decision to throttle trading on the Robinhood app was taken. Tenev reiterated his story: after Wednesday’s surge in purchases of so-called ‘meme stocks’ fueled by WallStreetBets, the National Securities Clearing Corporation (NSCC) raised the demand for Robinhood capital deposit to a whopping $3 billion. Banning the purchases helped lower the sum to a manageable level of $700 million, which allowed Robinhood to open on Thursday.Also on rt.com Robinhood CEO accused of ‘lying’ on CNN after claiming he halted stock purchases to adhere to vague ‘regulatory requirements’
Robinhood is a no-commission brokerage which touts itself as democratizing the financial market. The NSCC acts as a clearing house for the entire US stock trade. Brokerages have to file deposits as a means of managing risk so that they can get access to exchanges and be able to process trade orders.
Even if Tenev’s story is completely true, the liquidity fix may have been a violation of Robinhood customers’ rights, which is why a class-action lawsuit has been filed against the platform over it. On top of that, Robinhood is widely suspected of taking the decision to limit the damage done by the market rush to big hedge funds. The funds shorted heavily against companies like video game retailer GameStop, expecting their stocks to fall, and this strategy backfired when the prices instead skyrocketed last week.Also on rt.com NY charity Robin Hood receives undue flak from people angry at Robinhood trading app, finds 'silver lining' in new supporters
Musk pressured Tenev on whether the NSCC “holding a gun to his head” was the result of hedge funds like Citadel and other market makers having a say in who is in charge of the organization. Despite its regulatory functions, the NSCC is not a government agency but a subsidiary of the Depository Trust & Clearing Corporation, a private holding.
“I have not any reason to believe that,” Tenev replied, adding that thinking otherwise gets people “into conspiracy theories a bit.” The Robinhood CEO said the NSCC deposit demand was “reasonable” under the circumstances, even if the formula they used to calculate the sum was “opaque.” Some listeners felt disappointed with his answers, even if they were amused by the person asking the questions.
Musk, who in January replaced Amazon’s Jeff Bezos as the world’s richest person due to the growth of Tesla stock, was among the first people to jump on the developing GameStop story. Unlike some other wealthy individuals in the US, he is highly critical of short sellers when referring to the Wall Street vs. WallStreetBets stand-off.
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