Economy

Robinhood says it has paused buying some securities as deposit requirements increase tenfold

File image: The Robinhood app is shown on screen in this infographic on January 29, 2021. REUTERS / Brendan McDermid / Clarification

(Reuters) – Online brokerage Robinhood, one of the hotspots of the retail craze this week, said it had temporarily imposed purchase restrictions on a small number of securities as the stock clearinghouse’s deposit requirements increased tenfold.

“ … the amount required that we had to deposit in a clearinghouse was very large – volatile individual securities represent hundreds of millions of dollars in filing requirements – we had to take steps to curb the purchase of those volatile securities to ensure, ” he said in a blog post at the time. Late Friday “We can comfortably meet our requirements.”

The free and easy-to-use Robinhood app has made it popular a new generation of young traders, and its restrictions on Thursday sparked a backlash from prominent politicians and celebrities.

Retail investors using Robinhood and other apps led the so-called “reddit rally” that pushed shares of GameStop Corp and other supported companies on social media platforms including Reddit, leading to huge losses for the large hedge funds that shortened stocks.

Co-reporting by Rama Venkat, Bengaluru; Edited by Raju Gopalakrishnan

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