Why did the stock trading app Robinhood 'restrict the purchase of stocks' but not the sale?

On January 28, 2021, the stock trading app

Robinhood restricted the trading of GameStop , a video game sales chain whose stock price tripled in five days, but received a fierce backlash from users 29 Trading resumed from the day. IT news blog stu2b50.dev explains why Robinhood restricted the purchase of GameStop shares but not the sale of these temporary restrictions.

Why Robinhood Disabled Buys but not Deals

Robinhood updated its official blog on January 29, explaining that it has decided to restrict trading of some stocks, including GameStop, 'because of the sudden rise in stock prices, the deposit required for settlement has skyrocketed.'

GameStop Stock Trading Restrictions Robinhood, a stock trading app, explains, 'I didn't want to prevent you from buying stock.' --GIGAZINE

When a securities company such as Robinhood makes a payment, the deposit must be paid to a clearinghouse, which is responsible for the processing required to make the payment, but the amount depends on the risk of the stock market.

The following is a ' normal distribution graph showing the risk of stock price fluctuations in the 95th percentile range' created by stu2b50.dev to briefly show the mechanism. The vertical axis is probability and the horizontal axis is Robinhood's net. Represents an open position in. The important point here is that the more the green axis shifts to the right from here, the more money Robinhood has to prepare as a deposit.

And this is the graph when the number of people who want to buy stocks exceeds the number of people who want to sell. With more orders to buy stock, Robinhood has to prepare more money for settlement.

The following is a graph when the fluctuation range of the stock price becomes larger. As the market becomes unstable, the amount of money required will increase further.

From this point, stu2b50.dev said, 'Buy orders for stocks worsen Robinhood's cash flow and improve sell orders. As a result, Robinhood was unable to make deposits and was forced to limit stock purchases. On the other hand, selling shares is not a problem, 'he said, explaining why Robinhood restricted the purchase of shares but not the sale.

The following traders have restricted the purchase of GameStop shares.

・ Robinhood
M1 Finance

stu2b50.dev, such as Robinhood, which launched in 2013, and Webull in 2017, has restricted the purchase of GameStop shares by many emerging fintech companies, while Charles Schwab , an online brokerage firm founded in 1971. Pointed out that the restrictions were negligible. 'It seems like a new brokerage firm with limited capital resources has restricted the purchase of GameStop shares this time,' he said.

in Web Service, Posted by log1l_ks