Robinhood Co-founder and CEO Vladimir Tenev made a surprise appearance on Clubhouse early Monday with Tesla Inc TSLA counterpart Elon Musk, who grilled him extensively on recent events.
What Happened: Tenev said it had been a “surreal” week for him, in a reference to the Reddit investor-led short squeeze rally in the shares of Gamestop Corp GME, Nokia Oyj NOK, AMC Entertainment Holdings Inc AMC, Blackberry Ltd BB and others.
The brokerage head referred to these stocks as “meme stocks” throughout the broadcast where he appeared to clarify the events of the tumultuous week — when purchase of such stocks was restricted on the popular trading app.
Tenev said the app experienced “unprecedented volume” and “load on the system.” He pointed out that the net buys increased exponentially.
Robinhood was among the top apps on Apple Inc AAPL and Alphabet Inc’s GOOGL GOOG respective app stores as of last week, Tenev noted.
Detailing the sequence of events that led to the suspension of buying in the Reddit-fueled stocks, he said Robinhood received a demand for $3 billion from the National Securities Clearing Corporation in the wee hours of Thursday.
NSCC provides clearing, settlement, risk management, and central counterparty services.
The executive explained that Robinhood had to put up money for the NSCC based volatility and the concentration of securities but the formula behind the demand was not fully known to him.
Why It Matters: The NSCC is not a government agency but is rather controlled by a consortium, as per Tenev.
The executive said that on Monday’s opening, some of the “stringent limits” placed on the hot stocks will be removed.
Tenev said that some limits would always be in place. “If someone decided to deposit $100 billion and trade in one stock that’s not gonna be possible.”
“Citadel and other market makers were not involved in it,” said Tenet in reference to the trading restrictions.
NSCC had lowered its deposit requirements to $1.4 billion after Robinhood reached out. After explanations were given on the restrictions, the clearinghouse dropped the deposit to $ 700 million.
Tenev admitted that restricting trade was a “bad outcome for customers” but other brokers had also placed similar restrictions.
In a lighter moment in the interview, Musk asked Tenev if he was being held hostage while handing out this explanation, to which the Robinhood CEO replied in negation, saying “thanks for asking.”
Related Links: Robinhood Gets $1B Funding, Taps Credit Line As It Prepares To Resume Trading Of GameStop, Other Hot Stocks
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