- Robinhood’s CEO criticized the “runaway chain response” of short-selling the identical shares a number of occasions.
- “That is a whole lot of what causes this short-squeeze dynamic to start with,” he instructed DealBook’s convention.
- There’s an argument to be made that the identical share must be shorted solely as soon as, he stated.
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Quick promoting the identical shares repeatedly causes a “runaway chain response” that leads to chaos for markets and traders, Robinhood CEO Vlad Tenev stated on the New York Times DealBook conference Tuesday.
“In the event you quick the identical share, you recognize, ten occasions, twenty occasions, effectively then, if it will get recalled there’s type of like ten holders of that share,” he stated. “That is a whole lot of what causes this short-squeeze dynamic to start with.”
Tenev stated many market contributors do not absolutely perceive the “plumbing” of the monetary system, however there’s now extra eagerness to grasp the ideas of short-selling and payment for order flow.
“What number of occasions ought to we let the identical share be shorted? I believe there’s an argument that the reply must be one,” he instructed host Andrew Ross Sorkin. “In the event you quick promote the identical share tons of of occasions, I do not know if folks have actually studied the consequences of that and the way issues can be totally different if there was some limitation.”
Tenev was joined on the DealBook session by former SEC chairman Jay Clayton, who known as for extra real-time disclosure of shorts.
Robinhood got here below fireplace final month for quickly blocking trades of unstable equities together with GameStop, AMC, and Nokia, following a Reddit-fueled shopping for frenzy. The brokerage defended its decision by saying the halt was the results of a spike in its legally-mandated deposit necessities.
In his remarks to Congress final week, Tenev denied blocking purchases on the request of hedge funds and known as to change SEC buying and selling guidelines. He requested the committee to contemplate settling trades in real-time, with a view to permit traders to make purchases quicker and permit brokers to clear up proprietary money.
Robinhood is now expanding its live phone support after the corporate’s lack of buyer help got here below fireplace on the Congressional listening to.