Robinhood Is Said To Draw On Bank Credit Lines Amid Tumult
An anonymous reader quotes a report from Bloomberg: Robinhood, the trading app that's popular with investors behind this month's wildest stock swings, has drawn down some of its credit lines with banks, according to people with knowledge of the matter. The firm has tapped at least several hundred million dollars. The company's lenders include JPMorgan Chase and Goldman Sachs, according to data compiled by Bloomberg. "As a brokerage firm, we have many financial requirements, including SEC net capital obligations and clearinghouse deposits," Robinhood said in a blog post Thursday. "Some of these requirements fluctuate based on volatility in the markets and can be substantial in the current environment. These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today." In an interview late Thursday on CNBC, Robinhood Chief Executive Officer Vlad Tenev said the deposit requirements govern how much leeway the firm can give to customers who are buying stocks. "We pulled those credit lines so that we could maximize within reason the funds we have to deposit at the clearinghouses," Tenev said. The extreme volatility "generated substantial risk" for brokerages, resulting in the need for stricter requirements on those firms, according to the Depositary Trust & Clearing Corp. "When volatility increases, portfolio margin requirements increase too," Wall Street clearinghouse DTCC said in an emailed statement.
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