Robinhood Blames Tenfold Deposit Hike for GameStop Trade Limits
Robinhood restricts purchases of volatile stocks like GameStop due to a massive increase in clearinghouse deposit requirements. The popular trading app currently limits customers to buying just one share of the viral video game retailer.
Robinhood imposes temporary buying restrictions on a small number of volatile securities due to a tenfold increase in deposit requirements from a central Wall Street clearinghouse. The free-trading app explains that individual volatile stocks account for hundreds of millions of dollars in necessary deposits, forcing the company to limit buying to comfortably meet these financial obligations.
These limitations come as amateur investors use Robinhood and other platforms to drive up the prices of heavily shorted stocks, causing GameStop shares to skyrocket 400% in a single week. This massive surge inflicts major losses on hedge funds that shorted the stock and draws intense scrutiny from Robinhood customers who feel frustrated by the sudden trading limits.
The online brokerage initially blocks users from buying new shares entirely before easing the rule to allow the purchase of just a single share of GameStop. A total of 50 securities now face restrictions on the stock trading app as the company navigates this unprecedented market volatility.