Robinhood CEO: We Weren’t ‘Forced’ to Limit Stock Buying Amid Reddit-Driven Surge

Despite chatter circulating Thursday that Robinhood had been compelled to halt trading of stocks being targeted by a Reddit group, the firm’s CEO said it alone had made the decision in order to safeguard the firm.

In a video interview on Thursday with Bloomberg’s Emily Chang, Vlad Tenev said the rumors were “categorically false” and Robinhood wasn’t “directed by a market maker or any other market participant,” but rather the decision was based on a “technical and operational” one.

“Robinhood, as a brokerage, has financial requirements including … deposits that we have to make to various clearinghouses. Some of these requirements fluctuate based on volatility in the markets,” said Tenev.

In order to “protect the firm” and Robinhood’s customer base, Tenev said his platform disabled purchasing of 13 stocks associated with a Reddit trading group called WallStreetBets (WSB). Tenev added that buy orders for the 13 securities could resume as early as tomorrow.

The current flurry of trader activity has represented an “unprecedented market environment” over the past couple of weeks, according to the CEO. He said Robinhood had not disable selling of the stocks as it would have been “painful” to users of the platform if they weren’t allowed to exit their positions.

Share prices for businesses such as Nokia (NOK), AMC Entertainment (AMC) and GameStop (GME) rose to astronomical highs in recent weeks when WSB sought to “short squeeze” large U.S. institutional hedge funds looking to bet against those companies.

A number of retail traders have since exited their positions amid calls to hold with “diamond hands” – referring to a mindset of maintaining positions in an attempt to drive up stock prices. Despite the calls, AMC, GME and NOK’s share prices have fallen back over the last 24-hours, while lawsuits were filed against Robinhood.

“Concentrated investing” around these types of stocks was in high demand because of an “intersection” of social media and finance, the CEO said.

“I can kind of understand how Clorox and Lysol were feeling at the beginning of the dynamic when there was so much demand,” said Tenev referring to cleaning products indirectly touted by Donald Trump as a potential medical treatment to combat the rise of COVID-19.

When pressed by Chang over whether Tenev would be willing to visit Washington D.C. to testify about its actions, the CEO said he was open to having a conversation and that the current developments presented an “opportunity” to educate the public regarding how the mechanics of financial settlements in the market work.

See also: Robinhood Pays SEC $65M to Settle Allegations It Misled Customers

“Market volatility which increases the deposit requirements at various clearinghouses that we have to deposit cash into … the more cash we have available to deposit at these clearinghouses the more we can allow customers to buy, especially if these stocks are unrestricted,” Tenev said. “We are interested in removing the restrictions as per our operational requirements and increasing the amount of cash available to fund these deposits that will allow us to better do that to the greatest extent possible.”