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The risk to Robinhood is GME crashing by more than the amount of the margin. A large brokerage that has been through crashes before has systems in place, and c
by baking 6y ago
The risk to Robinhood is GME crashing by more than the amount of the margin. A large brokerage that has been through crashes before has systems in place, and can spread the remaining risk around. If a large portion of your customers are invested in a handful of stocks, their risk becomes your risk. Also, other customers of Robinhood who have cash that is in an uninsured account are also at risk even if they are not invested in GME.
- DennisP 6y agoThen why not shut down margin purchases of GME, but not cash purchases?
- baking 6y agoThere was some speculation that they didn't have that capability. Brokerage firms should have the ability to restrict margin trading in particular stocks, but what if Robinhood couldn't, at least not on short notice? There could is also the concern about new accounts trading in GME with funds that might be suspect. It's a risk you don't want to take if you don't know your customers and the bubble is ready to burst at any moment.