Congress Plans Hearings After Robinhood Trading Freeze
A bipartisan group of senators has expressed outrage after the trading platform restricted particular stock purchases.
Leaders of House and Senate committees responsible for financial industry oversight are planning to hold hearings regarding the conduct of trading platform Robinhood after it froze purchases of shares in GameStop and other equities that have been boosted by an unprecedented wave of online retail investment.
On Thursday morning, Robinhood blocked investors from purchasing shares in GameStop, AMC, Bed Bath & Beyond, BlackBerry and Nokia, which have become the subject of unprecedented rallies over the past few days as small retail investors flocked to companies being bet against by hedge funds.
Users were left unable to buy further stock, though they were still permitted to sell their positions. The platform also raised margin requirements for specific trades and cancelled stock orders placed the previous night.
“We continuously monitor the markets and make changes where necessary,” Robinhood said in a press release before markets opened. “In light of recent volatility, we restricted transactions for certain securities to position closing only.”
Lawmakers as far apart on the political spectrum as Representative Alexandria Ocasio-Cortez and Senator Ted Cruz condemned the decision of Robinhood to “block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit.”
“We must deal with the hedge funds whose unethical conduct directly led to the recent market volatility and we must examine the market in general and how it has been manipulated by hedge funds and their financial partners to benefit themselves while others pay the price,” said Maxine Waters, chair of the House Financial Services Committee.
Robinhood was not the only broker to freeze purchases in the volatile stocks, with Schwab, M1, Public and Webull also temporarily curbing trades. Shares in GameStop and AMC fell 44% and 57% respectively following the platforms’ new restrictions.