Robinhood CEO Vlad Tenev told CNBC on Thursday that the company restricted trading of GameStop stocks to protect the company and users.
“In order to protect the firm and protect our customers we had to limit buying in these stocks,” Tenev told CNBC's Andrew Ross Sorkin.
GameStop stock collapsed Thursday morning by 62 percent, shortly before 11:30 a.m., triggering trade freezes.
Multiple online trading platforms including Robinhood and TD Ameritrade blocked or restricted trades of the GameStop stock, which has seen major ebbs and flows in recent days after being targeted by users on Reddit.
Tenev described it as a “difficult decision” to limit users’ buying power, but said they were still allowed to sell those stocks or trade in.
“We absolutely did not do this at the direction of any market maker or hedge fund or anyone,” Tenev said during an interview segment with CNBC host Sorkin on Thursday evening.
Robinhood CEO Vlad Tenev speaks out after the company decided to restrict trading in GameStop and other stocks today. “In order to protect the firm and protect our customers we had to limit buying in these stocks,” he tells @andrewrsorkin. https://t.co/LsJ5iNjJAB pic.twitter.com/yJATy66TcZ— CNBC (@CNBC) January 29, 2021
“Robinhood is a brokerage firm, we have lots of financial requirements. We have SEC net capital requirements and clearing house deposits. So that’s money that we have to deposit at various clearing houses,” Tenev continued.
“Some of these requirements fluctuate quite a bit based on volatility in the market and they can be substantial in the current environment where there’s a lot of volatility and a lot of concentrated activity in these names that have been going viral on social media,” he added.
Robinhood's decision to restrict trades garnered immediate backlash by traders and lawmakers on both sides of the aisle Thursday who argued that the restriction leaves smaller investors at a disadvantage, as major investors and firms have more ways to access GameStop stock.
Robinhood is a trading app popular among new investors and young people, and the move to restrict buying capacity affected many amateur traders.
A lawsuit has already been filed against Robinhood for restricting buying stocks that were seeing unprecedented levels of growth.
The company will allow limited buying of these stocks on Friday.