According to people familiar with the matter, the trading app Robinhood Markets, which is popular with investors behind this month’s wildly stock swings, has drawn some of its credit lines with banks.
People said the firm has tapped at least several hundred million dollars. The company’s lenders include JP Morgan Chase & Co. and Goldman Sachs Group Inc. Data compiled by Bloomberg. Robinhood and representatives of those banks declined to comment.
Behind-the-scenes to bolster Robinhood’s finances indicate that recent market havoc is putting a strain on the company, which has tied up with retail investors for its app during the epidemic. The firm is one of the brokerages whose shares have declined on trading GameStop Corp. And AMC Entertainment Holdings Inc. set the resentment among customers on Thursday. Robinhood also told users that it may close some of their posts as it takes steps to reduce account risks.
“As a brokerage firm, we have several financial requirements, including SEC net capital obligations and clearinghouse deposits,” Robinhood said Blog post thursday “Some of these requirements fluctuate depending on market volatility and may be sufficient in the current environment. These requirements exist to protect investors and markets, and we take our responsibilities seriously to follow them through the measures we are taking today. “
According to the Wall Street Clearinghouse NCC, extreme volatility “generates substantial risk” for brokerage, imposing strict requirements on those firms.
“When volatility increases, portfolio margin requirements also increase,” Depository Trust & Clearing Corp said in a statement.
Read more: Reddit Stock Scramble for Brokers ‘Generating Substance Risk’
With its user-friendly app and commission-free trades, Robinhood grew rapidly in recent years and then all those during the epidemic turned to stock markets to make money and spend time during lockdown. Became the platform of choice. For months, the firm hopes to make a public offering earlier this year.
But this month’s drama surrounding price hikes for GameStop and AMC coordinated by investors on Reddit has put Robinhood at the center of controversy. The company said on Thursday after the close of US trading that it would allow “limited purchases” to resume in certain securities.
Robinhood has already bowed to its credit with Banks for a bad season. In March, the firm A trio of lenders ended the entire $ 200 million facility, people familiar with the matter said at the time, as the Coronavirus epidemic closed a flood of transactions and market swings, during which Robinhood’s trading platform Suffered losses again and again.
– with assistance by Misyrlena Egkolfopoulou
()Updates with clearhouse comments begin in the fifth paragraph.)