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Stock, GameStop, NYSE:AMC, BlackBerry Limited, Dow Jones Industrial Average, Finance Here's why Robinhood is restricting users from buying surging stocks like GameStop

Stocks have seen huge gains, including gamestop and robin hood today, reversing or gamestop reversing course today, after those brokers, restricted trade on that, we are also getting reports. Uh that robin hood has reportedly been hit with a lawsuit over the removal of gamestop. In that lawsuit seeking a class action status filed in federal court in new york, let’s bring in the ceo of weibull anthony de nir and anthony your platform, also among those that’s restricted trade for the likes of amc as well as gamestop. We were talking about alexandria, ocasio, cortez, now, jumping in on the debate, saying that she would be for a hearing in this if it’s necessary. Why restrict the trade and what led to that action? Well, it wasn’t our choice. Uh, our clearing firm, gave us a call and said we’re gon na have to stop allowing new opening positions in the three names: amc, gme and koss uh highly volatile, and what happens is this is not a political decision and unfortunately, it got political uh. I think uh, you know, i think it was once said that don’t, let any good crisis go to waste and that’s. Clearly what’s happening here and we’re, seeing politicians jump on the bandwagon, so they can get. They can start trending on twitter, but in reality, what’s going on is that the there is a two day settlement between if you buy the stock today, those brokerage firms that you bought that stock on have to fund that trade with the with the clearing central house Called dtc for two whole days and because of the volatility of these stocks, dtc has made the cost of that of the collateral for the two two day holding period extremely expensive, and we just can’t afford well not weeble we’re, not a clearing firm, but our clearing Firm simply cannot afford the cost to settle those trades.

We cannot use customer funds to front that cost due to regulation, so the brokerages or the clearing firms have to go into their own pockets to do it and they simply can’t afford uh the cost of that uh trade clearance. That is the reason why these stocks are coming off has nothing to do with the decision or some sort of uh. Some sort of you know closed room. Cigar smoke filled cigar room, uh of wall street firms getting together to you know to to dismiss to the dismay of the retail trader. This has to do with settlement mechanics of the market, yeah anthony. Thank you for clarifying that, first of all, second of all, it is, i guess, interesting, because you know these moves had been here, at least in the case of gamestop for a while, we had the ceo robin hood on yesterday kind of talking about why they were Taking a different tact and not restricting trading, because you know they wanted to leave it to their individual retail investors to make these decisions didn’t want to step in and fuel into the nanny state idea. But what about? Maybe curbing this a little bit earlier, because the fact of the matter is you’re going to have retail investors, who are now kind of on the hook who might want to dump some of these shares who are stuck – and it seemingly looks like some of these moves – Have now triggered the bubble bursting? So what do you say to that? Well, that’s, absolutely false.

Actually zach there is. There is no way that a customer would not be able to sell a position they hold. We are simply stopping opening of new positions. Uh liquidations can happen at any time uh. This is you know, general market mechanics. We have customer protections in place uh. We would never stop a customer from being able to get out of a position, but currently we are stopping customers from getting into a new position, and that has to do with it possibly yeah. I wouldn’t. I didn’t mean to indicate that you guys wouldn’t. Let people exit positions, but the idea that this was running up or that this was looking. You know a little frothy people were talking about this on monday, when we saw gamestop start to move, i mean what about the speed in which you address these things. Was this something that maybe the clearinghouse had raised? Or you know, people were discussing what we should do about this uh leading up to thursday yeah i mean it was being addressed, uh it was being spoken about, but when the stock started getting up to these multi hundred dollar levels, i mean, if you look on Monday, gamestop was trading, you know below 100 um and now it’s trading. You know in several hundred dollars, so the cost of clearing those things have gone up by 3x overnight. So this is something in real time that we have to deal with in real time.

Anthony weeble, of course, your platform has been a big beneficiary of the growth in retail investment over the last year or so when we spoke to vlad tennant the co founder of robin hood yesterday, he said that part of that growth was also about investors really being Sick of being talked down to from the institution that increasingly individual investors were feeling empowered, and i wonder if you agree with that statement, how do you think the profile of your user has changed changed over the last year? Yeah? I listened to to that interview as well, and i think vlad did an amazing job. Speaking for the industry right and then when i say industry, i mean new brokers like robin hood, like weeble that reduced and tried to remove as best we could all barriers for entry um. You know nothing rings. True and we’ve been saying since day. One the moment we launched, we think that every investor should have an equal opportunity to have access and have the best tools available, so they can make the best investment decisions and go on their financial journey. He’S been a great spokesman for it, and you know we support that 100 percent and you guys were getting applause too, because you know you could still move over and trade on your guys platform up until recently, two when we’re talking about gamestop and amc uh. So what kind of a boost did you see in maybe new sign ups through all this it’s been a busy few days to put it lightly? To give you some context when, when robin hood stopped trading of some of the reddit games this morning, there was a huge influx of brand new customers to our you know to our platform uh our app actually went from.

I believe number eight yesterday to number three in the overall app store uh. It was where it peaked, uh, really cool, really cool times. I told i told all my team this morning, you know remember this day, stay focused stay sharp because in 10 years you’re going to be talking about this and telling you telling the people that are working under you uh. You know you were there for this and you were part of it so very unique time we did see. We did see a huge influx of applications uh and we continue to see them now. Even though we did uh, we did stop trading of of the reddit names at about 11 a.m. Eastern today, but it does open up weibo as a platform to new users, and they can see the benefits of weeble anthony. You said earlier that this discussion over what has materialized in the markets over the last several days has turned political, no question. We’Ve seen lawmakers weigh in whether that’s senator warren or aoc. You heard yesterday the white house press secretary saying that the treasury was looking into this as well there’s, going to be some kind of regulatory discussion, that’s likely to come out of this. What do you think the focus should be? Is it going to be on the hedge fund side or you think, on the retail side, i think a little bit of both it has gotten political. If we look at this story over the course of the week, it turned into a nostalgia by into a movement against the establishment, i.

e, hedge funds and now it’s even morphed. Again, it seems like a coronavirus, constantly mutating uh into now a political scene. Uh. The regulators are gon na be involved, and you know when we see all the halts going on in the market uh, we see brokers stepping back due to cost of clearance to actually trade. These things there is an outcry, because a lot of a lot of the retail don’t actually understand the dynamics that happen after a trade. I think when you say the regulator’s stepping in it will happen on both sides, it’s going to happen on looking into should a hedge fund be allowed to get a 10 times leverage and short 140 150 percent of a company should that be allowed in a regular. You know in a in a healthy market and then on the other side should should it also be allowed to have mob and herd mentality of rolling into stocks uh, and should these things be curved uh, you know look at the examples that happened overnight in australia, Where a mining company gme in australia was up, you know was up a hundred percent overnight, because people just blindly went in on anything gme without reading below the below the headline, yeah well, clearly, a very busy day for you. I appreciate you taking the time to hop on with us. As always a friend of the show, ceo weeble, the ceo of weeble, anthony engineer, thanks again for joining us.

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