The Robinhood application on a smartphone.
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Online broker Robinhood announced that it has placed temporary purchase restrictions on a small number of stocks as the deposit requirements for stocks imposed by the Wall Street clearinghouse have increased tenfold.
The decision of Robinhood, a pioneer and app for free trade popular with retail investors, was scrutinized by its customers over the past week.
“It wasn’t because we wanted to stop people from buying these stocks,” Robinhood said in a blog post published late Friday.
“We did this because the amount required to deposit into the clearing house was so large – with individual volatile securities adding up to hundreds of millions of dollars in deposit requirements – that we had to take steps to purchase them limit volatile stocks to ensure this could comfortably meet our requirements, “it continued.
Amateur investors using Robinhood and other apps are offering sharply truncated stocks and have caused GameStop stocks to skyrocket 400% over the past week, causing significant losses for hedge funds, which have cut stocks .
Robinhood initially announced to investors that they could only sell, and not buy, new stock in certain companies that grab retailer attention on Reddit. The broker now allows customers to buy just a single share of GameStop. A total of 50 stocks are now limited to the stock trading app.