10 fold increase in deposit requirement led to temporary buying curb: Robinhood

In a statement, online broker Robinhood said, it has placed temporary buying restrictions on a small number following ten-fold increase in deposit requirements as mandated by clearing house.

“….the required amount we had to deposit with the clearing house was so large – with individual volatile securities accounting for hundreds of millions of dollars in deposit requirements – that we had to take steps to limit buying in those volatile securities to ensure we could comfortably meet our requirements,” said Robinhood in a blog post late on Friday.

Robinhood’s simple-to-use and fee-free app has made it popular with new generation of small-time traders; its move to apply curbs on Thursday drew a heavy backlash from high-profile politicians and celebrities.

Retail investors using Robinhood and other apps drove the so-called “Reddit rally” which pushed up shares of GameStop Corp and other companies championed on social media platforms resulting in heavy losses for big hedge funds that had shorted those shares.

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