Robinhood CEO Vlad Tenev explained what he called the platform's "very difficult decision" to restrict buying of GameStop (GME) and about a dozen other securities during a Thursday evening interview on CNBC.
He said the decision was made in response to requirements Robinhood must adhere to as a brokerage firm.
"We have lots of financial requirements, including SEC net capital requirements and clearinghouse deposits — that’s money that we have to deposit at various clearinghouses," Tenev said. He added that such requirements can fluctuate based on market volatility and can be "substantial in the current environment where there’s ... a lot of concentrated activity in these names that have been going viral on social media."
He added: "In order to protect the firm and protect our customers, we had to limit buying in these stocks."
Tenev also shot down speculation spread on social media Thursday that Robinhood restricted regular trading of the volatile stocks at the request of large Wall Street firms. One Robinhood user alleged in a class action lawsuit filed against the trading platform Thursday that the move was made "knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers."
We absolutely did not do this at the direction of any market maker or hedge fund or anyone we route to or other market participants," Tenev said on CNBC.
The company plans to allow limited buying of the volatile stocks it restricted starting on Friday morning.
"Of course Robinhood stands for everyday investors," Tenev said. "It pains us to have had to impose these restrictions, and we’re going to do what we can to enable trading in these stocks."