scorecardRobinhood CEO says shorting the same shares over and over causes a 'runaway chain reaction' - and it's worth looking at setting a limit
  1. Home
  2. stock market
  3. news
  4. Robinhood CEO says shorting the same shares over and over causes a 'runaway chain reaction' - and it's worth looking at setting a limit

Robinhood CEO says shorting the same shares over and over causes a 'runaway chain reaction' - and it's worth looking at setting a limit

Shalini Nagarajan   

Robinhood CEO says shorting the same shares over and over causes a 'runaway chain reaction' - and it's worth looking at setting a limit
Stock Market2 min read
  • Robinhood's CEO criticized the "runaway chain reaction" of short-selling the same shares multiple times.
  • "That's a lot of what causes this short-squeeze dynamic to begin with," he told DealBook's conference.
  • There's an argument to be made that the same share should be shorted only once, he said.

Short selling the same shares repeatedly causes a "runaway chain reaction" that results in chaos for markets and investors, Robinhood CEO Vlad Tenev said at the New York Times DealBook conference Tuesday.

"If you short the same share, you know, ten times, twenty times, well then, if it gets recalled there's sort of like ten holders of that share," he said. "That's a lot of what causes this short-squeeze dynamic to begin with."

Tenev said many market participants don't fully understand the "plumbing" of the financial system, but there is now more eagerness to understand the concepts of short-selling and payment for order flow.

"How many times should we let the same share be shorted? I think there's an argument that the answer should be one," he told host Andrew Ross Sorkin. "If you short sell the same share hundreds of times, I don't know if people have really studied the effects of that and how things would be different if there was some limitation."

Tenev was joined at the DealBook session by former SEC chairman Jay Clayton, who called for more real-time disclosure of shorts.

Robinhood came under fire last month for temporarily blocking trades of volatile equities including GameStop, AMC, and Nokia, following a Reddit-fueled buying frenzy. The brokerage defended its decision by saying the halt was the result of a spike in its legally-mandated deposit requirements.

In his remarks to Congress last week, Tenev denied blocking purchases at the request of hedge funds and called to modify SEC trading rules. He asked the committee to consider settling trades in real-time, in order to allow investors to make purchases faster and allow brokers to clear up proprietary cash.

Robinhood is now expanding its live phone support after the company's lack of customer assistance came under fire at the Congressional hearing.

READ MORE ARTICLES ON




Advertisement