Robinhood says due to “recent volatility” it is restricting trading in some stocks, including GameStop, AMC, BlackBerry, and Nokia, to “position closing only”

CNBC 2021-01-29 Maggie Fitzgerald

Context & Ripple Effects

Robinhood's initial position-closing rule became the opening step in a broader tightening: within days, the broker had expanded restrictions to more than 50 stocks and capped some GameStop purchases at one share.

The restrictions were subsequently loosened, though GameStop, Nokia, and BlackBerry remained among the names constrained after the list was reduced. The episode later became the subject of regulatory investigations into Robinhood's restrictions.

First-order effects

Robinhood customers holding GameStop, AMC, BlackBerry, or Nokia can exit positions but cannot add to them through the broker, immediately limiting buying activity in those names on its platform.
Robinhood assumes a more active risk-control role over customer trading, rather than leaving access to the named stocks unchanged during the volatility.

Second-order effects

The initial limits set up a wider restriction regime, with Robinhood later applying constraints to more than 50 stocks and limiting some GameStop purchases to one share.
Customers seeking to increase exposure to the restricted stocks must either wait for Robinhood's limits to change or use another venue, while existing users face the prospect of forced position closures under the firm's account-risk measures.

Third-order effects

The episode puts retail-broker trading controls under regulatory scrutiny, making the terms under which a platform can restrict access a lasting governance issue rather than solely an operational decision.
If brokers respond to volatile retail-driven trading with position and purchase limits, investor access becomes more dependent on each platform's risk controls during market stress.

The trend: Retail trading platforms are becoming active gatekeepers of market access when volatility triggers their internal risk controls.

Discussion

@aoc Alexandria Ocasio-Cortez on x
This is unacceptable. We now need to know more about @RobinhoodApp's decision to block retail investors from purchasing stock while hedge funds are freely able to trade the stock as they see fit. As a member of the Financial Services Cmte, I'd support a hearing if necessary. http…
@tedcruz Ted Cruz on x
Fully agree. 👇 https://twitter.com/...
@sequoia @sequoia on x
Sequoia did not pressure Robinhood to halt the trading of any stocks. This rumor is completely false.
@arkhondh @arkhondh on x
.@RobinhoodApp's apparently selling people's shares “for their own good” 🙃 Actual insanity https://twitter.com/...
@robinhoodapp Robinhood on x
In light of current market volatility, we are restricting transactions for certain securities to position closing only, including $AMC and $GME. Read more here. https://rbnhd.co/...
@motherboard @motherboard on x
More than half of all Robinhood users own at least some GameStop stock. They are now unable to freely trade it; the app is only allowing users to close out their positions. https://www.vice.com/...
@chamath Chamath Palihapitiya on x
I remember when I met the @RobinhoodApp founders when they were raising their Seed, Series A and Series B. I passed. Why? Optimize for integrity whenever possible because integrity compounds and assholes will fuck you. #DeleteRobinhood
@slasher Rod Breslau on x
after delisting GameStop and AMC, Robinhood has gotten over 100,000 1 star reviews in one hour on the app store, now set with a 1 rating. they deserve it https://twitter.com/...
@jarule Ja Rule on x
Yo this is a fucking CRIME what @RobinhoodApp is doing DO NOT SELL!!! HOLD THE LINE... WTF 🤬
@rashidatlaib Rashida Tlaib on x
This is beyond absurd. @FSCDems need to have a hearing on Robinhood's market manipulation. They're blocking the ability to trade to protect Wall St. hedge funds, stealing millions of dollars from their users to protect people who've used the stock market as a casino for decades. …
@dellcam Dell Cameron on x
So many people are trying to read the @RobinhoodApp lawsuit online they've crashed the Southern District of New York's electronic case file website. $GME $AMC $NOK https://twitter.com/...
@panzer Matthew Panzarino on x
The wrong people started winning. Simple as that.
@casey Casey Neistat on x
everyone complaining about @RobinhoodApp delisting GameStop and I'm over here on @public about to get Bill Gates rich. https://twitter.com/...
@bgurley Bill Gurley on x
Official reason for RH actions is “volatility.” Details likely relate to their business model (would Schwab do this due to vol?). We don't have visibility into those payments/terms from their TRUE customer (the exchanges that pay them for order flow). Clarity on that would help. …
@dellcam Dell Cameron on x
holy shit https://twitter.com/...
@rachelmetz Rachel Metz on x
i think it's a good time to remind everyone that if you're not paying for a service with actual money, you are most certainly paying for it in another way, as this @VICE story by @bigblackjacobin nicely points out. https://www.vice.com/...
@jason_koebler Jason Koebler on x
BREAKING: Robinhood has restricted users from buying GameStop, AMC, BlackBerry, Nokia stock. This is VERY CRAZY, I do not see how RobinHood survives screwing its users like this https://www.vice.com/...
@austin_rief @austin_rief on x
The Head of Comms at Robinhood has the worst job in startups today. Will be fun dealing with WSB, Dave Portnoy, Chamath and the Twitter mob.
@vladtenev Vlad on x
I want to clarify a few things and also explain why Robinhood made the decisions it did to restrict purchasing of certain securities.
@themaxburns Max Burns on x
In case you aren't following the Reddit/WallstreetBets/$GME stock market madness, @RobinhoodApp is now selling off many Redditors' shares *whether they want to sell them or not.* https://twitter.com/...
@poorlyagedstuff Poorly Aged Things on x
https://twitter.com/...
@rokhanna Ro Khanna on x
Yes @aoc. We need an investigation into RobinhoodApp's decision and who influenced that. And this shows the need for a financial transaction tax on hedge fund shorting and SEC regulations on short selling practices. https://twitter.com/...
@balajis @balajis on x
We don't know all the facts yet. It is quite possible Robinhood was leaned on by the SEC, a banking partner, or one of many other regulators / regulated entities they are beholden to. We're seeing the limits of fintech vs crypto in real-time. Not your rails, not your stocks. http…
@tedlieu Ted Lieu on x
Why are brokerage firms like Robin Hood restricting trading in GameStop? Looks to me like a fear of too much profit going to ordinary investors. Can you explain @RobinhoodApp? https://twitter.com/...
@film_girl @film_girl on x
I have too much other stuff to do today but the conspiracy fiction that Citadel blocked GME on Robinhood to get payback for Melvin is sheer stupidity. Good explanation here https://news.ycombinator.com/ ...
@matthewstoller Matt Stoller on x
The fake populism is so irritating. Robinhood is shutting off trades because it borrowed too much to press its clients to engage in margin trading. Regulate. https://twitter.com/...
@markruffalo Mark Ruffalo on x
Just resign, @tedcruz. https://twitter.com/...
@dellcam Dell Cameron on x
Robinhood is still advising users “57% of analysts rate Nokia as a buy” while the stock is gated 😂 https://twitter.com/...
@arjunsethi Arjun Sethi on x
Oh shit! This is incredible! https://sheriffofnottinghamapp.com/
@reddit @reddit on x
can't wait to explain this week to my therapist
@bgurley Bill Gurley on x
Pretty wild to see the splits of opinions on both sides of the GME/RH discussion. I see arguments on both sides. How do people feel about taxing trading? Would cool down speculation and ALSO HFT. Pros? Cons?
@panzer Matthew Panzarino on x
Statement below is to counter a reddit rumor started by *checks notes* “Odin19199” — might just go viral now though. Tweets are tricky. https://www.reddit.com/... https://twitter.com/... https://twitter.com/...
@eddiezipperer Eddie Zipperer on x
Don't sell what you don't own https://twitter.com/...
@rbreich Robert Reich on x
This needs to be investigated. Apparently market manipulation is just fine when it's greedy Wall Street bankers gambling away our entire economy (as they did in 2008), but now that Redditors are rallying GameStop and AMC, it's time to restrict trading? Ridiculous. https://twitter…
@billpascrell Bill Pascrell, Jr on x
Many of the greedy hedge fund billionaires in this shady business pay lower taxes than their secretaries by exploiting maybe the most outrageous loophole in the tax code: carried interest. I will soon reintroduce legislation to end it. Hedge fund billionaires get enough breaks. h…
@robzacny Robert Zacny on x
Robinhood traded on this idea that it was somehow friendlier and gave you a better deal than older platforms for retail investors. But the mask is fully off now. https://www.vice.com/...
@bigblackjacobin Edward Ongweso Jr on x
“They will suicide bomb their own business models to protect the real powers ... When a system approaches a terminal crisis, its institutions will break their own rules to suppress elements that threaten the system's continued viability.” https://www.vice.com/...
@itsdansheehan Dan Sheehan on x
Please respect the markets, our app was not designed as a means of stealing from the rich to give to the poor. We here at Robin Hood believe that
@arjunsethi Arjun Sethi on x
Robinhood should change their name to Sheriff of Nottingham
@gartenberg Michael Gartenberg on x
Should place like Robin Hood “protect” people from making mistakes? https://twitter.com/...
@jasonaten Jason Aten on x
It's big customer, by the way—the one it cares about more than you—that's Citadel, which pays for Robinhood's order flow. It also happens to be the biggest investor in the hedge fund that just got bankrupted by the Game Stop short squeeze on RobinHood.
@emmakinery Emma Kinery on x
BREAKING: Robinhood customers sue after the site restricted transactions on certain stocks including GameStop https://www.bloomberg.com/... via @business
@caseynewton Casey Newton on x
Can't remember the last time I saw so many prominent venture capitalists and tech folks blast a tech company in public as with Robinhood today. The hit pieces are coming from inside the house!
@reckless Nilay Patel on x
Lotta people finding out that clicking “I agree” in the Robinhood terms of service means they agree to things
@fintechfrank Frank Chaparro on x
Robinhood won't let users buy $GME $AMC or $NOK, but they'll let them buy Dogecoin. Let that sink in for a second.
@tedlieu Ted Lieu on x
Dear Robinhood: I'm highlighting @RobinhoodApp because you say your mission is to “democratize finance for all.” Your actions in restricting customers from buying GameStop and AMC stock suggest the opposite. By only allowing people to sell, you are driving down share prices. Why?…
@pt Parker on x
Honest Robinhood: “Look, we designed the app to encourage *terrible* investment decisions because it is *highly* profitable for us. We stopped trading because you're probably gonna lose your house anyway, and now we're trying to minimize the lawsuits against us.” https://twitter.…
@davidsacks David Sacks on x
When a company takes an action inimical to its stated mission, it should post the government order requiring it, or if that doesn't exist, a well reasoned explanation for why it's changing course. Else its users will assume the worst.
@sama Sam Altman on x
fuck robinhood
@justinkan Justin Kan on x
SEC should investigate the following: 1. Did Citadel's hedge funds (Citadel Global Equities and Citadel Wellington) hold any short positions in stocks heavily owned by Robinhood users? And did they increase them in the past few days?
@chimeracoder Aditya Mukerjee on x
Robinhood's entire business is taking advantage of retail investors, but if you take politicians' and regulators' words and intentions at face value, any regulation to protect retail investors will actually still result in the same end result as what Robinhood is doing today.
@mattzeitlin Matthew Zeitlin on x
here's webull on the record saying it was the clearing firm that told them to restrict gme and amc https://twitter.com/...
@mims Christopher Mims on x
Also underappreciated that now Elizabeth Warren, AOC, Ted Cruz, Donald Trump Jr. and Ja Rule have all found common cause, and it's that the founders of Robinhood should be investigated (???)

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