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- Robinhood will allow limited purchases to GameStop, AMC, and other stocks part of the recent Reddit-fueled rally.
- The company said it restricted trading to comply with “financial requirements.”
- Businesses people and lawmakers criticized Robinhoods decision to restrict trading on January 28.
- Visit Business Insider’s homepage for more stories.
Robinhood announced it will reopen limited buying on GameStop securities.
The trading app known for allowing individuals to invest in the market without paying trading commissions blocked users from purchasing GameStop, AMC, and others on Thursday after the stocks skyrocketed in value.
Reddit users on the forum r/WallStreetBets encouraged members to buy GameStop shares in an attempt to drive the price up and undermine the stock’s short-sellers, like Citron Research partner Andrew Left. The frenzy drove GameStop’s share price to spike over 300% year-to-date.
In an email to users, Robinhood attributed the company’s decision to restrict trading to having to comply with financial requirements including SEC net capital obligations and clearinghouse deposits, that it said protected investors and the stock market.
“The past year in particular has shown us that the financial markets are for everyone-not just institutional investors and hedge funds,” Robinhood said in an email to users. “We’ve seen a new generation enter the market, and they’re sparking conversations about what it means to be an investor. We stand in support of you, our customers.”
Robinhood was not immediately available for further comment.
Robinhood initially restricted transactions for GameStop and others due to "recent volatility," per a blog post.
Robinhood's decision provoked criticism from the likes of billionaire Mark Cuban, lawmaker Alexandria Ocasio-Cortez, and Bartstool sports founder Dave Portnoy.
"This is unacceptable," Rep. Alexandria Ocasio-Cortez said in a tweet. "We now need to know more about @RobinhoodApp 's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit."
—Alexandria Ocasio-Cortez (@AOC) January 28, 2021
Robinhood's decision caused users to revolt against the app by flooding Google's app store with one-star reviews.
Read Robinhood's letter to users:
It's been a tough day, and we're grateful to you for being a Robinhood customer. In light of the extraordinary market conditions this week, we temporarily limited buying for certain securities this morning. Starting tomorrow, we plan to allow limited buys of these securities. We'll continue to monitor the situation and may make adjustments as needed.
This was a temporary decision made to best continue serving you, and was not an easy one to make. We know it's led to frustration and confusion, and wanted to provide some clarity.
As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits. Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today.
To be clear, this decision was not made on the direction of any market maker we route to or other market participants.
The past year in particular has shown us that the financial markets are for everyone-not just institutional investors and hedge funds. We've seen a new generation enter the market, and they're sparking conversations about what it means to be an investor. We stand in support of you, our customers. Democratizing finance for all means giving more people access, not less.
We'll keep monitoring market conditions and will update this Help Center article with the latest changes. We also published a blog post regarding today's events.
Thank you again for being a Robinhood customer. We're so grateful for your support.
Sincerely,
The Robinhood Team