Category: Uncategorized

Elon Musk grills Robinhood boss over GameStop row on Clubhouse

Tesla boss Elon Musk has grilled the co-founder of trading app Robinhood, Vladimir Tenev, about why it limited users buying shares in the US games retailer GameStop and other stocks.

Mr Tenev denied “conspiracies”, saying hedge funds and US financial regulators had tried to slow frenzied trading.

And he instead blamed a demand from regulators for a $3bn (£2.2bn) security deposit from Robinhood at short notice.

The interview was conducted on the audio-only social network Clubhouse.

Mr Musk’s 90-minute appearance was a major coup for Clubhouse, which is currently in a “beta” testing phase and requires users to be invited to access its platform.

It allows people to join private rooms for conversations, but participants are capped at 5,000.

However, fans streamed the interview on YouTube and overflow rooms on the platform, as Mr Musk’s appearance attracted unprecedented attention.

Mr Musk also spoke about travel to Mars, Bitcoin and brain implants during his session.

‘Democratising access’

Robinhood curbed buying of GameStop and some other shares last week.

Unlike most trading platforms, it does not charge a commission for letting users buy and sell shares. Instead it makes money by selling data on those deals to others before they go through.

Some hedge funds have lost out on the rise in GameStop’s shares because they had shorted the stock. This is where an investor tries to make money by betting a company’s share price will fall.

And Mr Musk questioned to what degree Robinhood was “beholden to” Citadel Securities, which is its biggest client. Citadel has suffered losses as a result of an investment in a hedge fund that had taken a large short position on GameStop.

Mr Musk has previously been critical of short selling, claiming it to be a “legal” scam.

Mr Tenev acknowledged that there had been “a rumour that Citadel or other market makers kind of pressured us into” putting restriction on trades, but added the claim was “just false”.

“Robinhood stands for, you know, democratising access to stocks,” he said on Clubhouse.

“We want to give people the access… but we had no choice in this case, we had to conform to our regulatory capital requirements.”

Mr Musk asked in response: “Did you sell your clients down the river, or [did] you have no choice?”

Mr Tenev repeated that Robinhood had to comply with financial requirements.

He said this involved an order from the National Securities Clearing Corporation – a clearing house used by the company – to provide “around $3bn” to back up its trades. He added the demand was later reduced to $700m.

Mr Tenev conceded, however, that Robinhood needed to be more transparent.

Source: BBC News

Read More