Reason Robinhood Blocked GameStop Trades: "Margin Requirements Became Too High"

Robinhood Explains Restrictions on GameStop Stock Trading

GameStop and Robinhood (Photo by AFP Yonhap News)

[Asia Economy Reporter Han Jinju] Robinhood, a US online securities trading firm that sparked controversy by restricting GameStop stock trading, explained that it was due to mandatory deposit requirements.

On the 30th (local time), Robinhood stated on its blog, "It was not because we wanted to prevent people from buying stocks," and explained, "The mandatory stock deposit required by the clearinghouse surged tenfold, leading us to halt stock purchases."

The clearinghouse refers to a financial institution established to reduce the risk of default in the trading of stocks and derivatives. It takes two days to settle stock trades, and if stock prices suddenly surge, the risk of a sharp decline within that period also increases, raising the possibility that one party may fail to fulfill the trade. Robinhood explained that this structure causes securities firms' mandatory deposits to increase.

Robinhood added, "The amount required to be deposited became too large, with hundreds of millions of dollars attributed to highly volatile stocks, so we had to take measures to restrict purchases to meet those requirements."

Earlier, individual investors and short sellers clashed over GameStop stock, a video game retailer, causing GameStop stock to surge about 400% this week and approximately 1600% for the entire month of January. On the 28th, Robinhood stopped purchases of GameStop, AMC, and other soaring stocks, leading to dissatisfaction among investors.

As politicians in the US criticized Robinhood and the Securities and Exchange Commission (SEC) announced it would investigate the situation, Robinhood issued this explanation.

This content was produced with the assistance of AI translation services.