Finance

Robinhood CEO to Elon Musk: No ‘shadiness’ in halted GameStop trades

OLIVIER DOULIERY/AFP via Getty Images
This photo illustration shows the logos of video grame retail store GameStop and trading application Robinhood in a computer and on a mobile phone in Arlington, Virginia on January 28, 2021. – An epic battle is unfolding on Wall Street, with a cast of characters clashing over the fate of GameStop, a struggling chain of…

Robinhood CEO Vlad Tenev is defending the app’s decision to halt trading of GameStop stocks during last week’s Wall Street chaos, saying there was no “shadiness” involved.

Tenev was grilled by Tesla CEO Elon Musk during an episode of “The Good Time Show” that aired on invite-only streaming site Clubhouse.

During the interview, Musk asked Tenev, whom he dubbed “Vlad the stock impaler,” to explain why Robinhood paused the trading of shares of GameStop and other companies that had been targeted by Reddit users seeking to take advantage of heavily shorted stocks.

Tenev said that around 3:30 a.m. Pacific Time last Thursday, the company received a request from the clearinghouse National Securities Clearing Corporation (NSCC) for a $3 billion deposit amid all the volatility, which he says was an “order of magnitude more than what it typically is.”

Until that point, Robinhood had raised $2 billion in venture capital.

“What everyone wants to know here is, did anything shady go down?” Musk asked, adding that it would be weird to receive such a request at 3 a.m.

“I wouldn’t impugn shadiness to it, or anything like that,” Tenev replied.

NSCC dropped the request to $1.4 billion, which was still high for Robinhood, Tenev said, forcing the company to limit trades.

A class action lawsuit was filed last week over that decision.

NSCC later dropped the request again to $700 million, which Tenev said the company paid promptly.

Musk asked, “Did you sell your clients down the river or did you have no choice?”

“If you had no choice, that’s understandable. But then, you know, we’ve got to figure out why you had no choice and who are these people that are saying that you have no choice,” Musk said.

Tenev said there should be more transparency around reporting requirements so that companies can plan better.

In a statement to The Hill, the Depository Trust & Clearing Corporation, the NSCC’s parent company, said the NSCC collects margins “according to calculations that are set forth in its rules.”

“When volatility increases, portfolio margin requirements increase too, and NSCC clearing members may pass on these costs to their clients, including brokerages that clear through them,” the company said. “Margin requirements protect the entire industry against defaults and systemic risk in volatile markets.”

–Updated at 3:53 p.m.

 

Tags AMC BlackBerry Elon Musk GameStop GameStop rally robinhood the Depository Trust & Clearing Corporation Vlad Tenev

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