Robinhood says it can now solidly handle surprise market events, a year after controversially restricting meme-stock trading

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Robinhood says it can now solidly handle surprise market events, a year after controversially restricting meme-stock trading
Robinhood said it now has a net capital position of $2.7 billion, which is 25 times what the SEC requires.Spencer Platt/Getty Images
  • Robinhood is in a "strong position" to support customers through unlikely market events, the company said Tuesday.
  • The brokerage said it now has a net capital position of $2.7 billion, which is 25 times what the SEC requires.
  • A year ago, Robinhood restricted trading in GameStop and other red-hot meme stocks to curb the wild speculative activity.
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Robinhood said it doesn't expect to surprise customers with trading restrictions again, about a year after its move to limit trades on Reddit-fueled meme stocks angered customers.

The trading app provider has a net capital position of $2.7 billion, 25 times what's required by the Securities and Exchange Commission for registered broker-dealers, it said in a Tuesday blog post.

Robinhood Securities "remains in a strong position to keep serving our customers through unlikely market events," it added.

The company highlighted the steps it's taken to earn back customer trust, such as bringing in round-the-clock phone support and tackling compliance-related risk issues.

A year ago, Reddit traders piled into heavily shorted meme stocks such as GameStop, triggering a market mania that has gone down as a populist movement aimed at disrupting the financial establishment. Robinhood, as well as other brokerages, restricted this trading to curb the wild activity.

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CEO Vlad Tenev defended the decision, saying Robinhood was asked for a $3 billion deposit by a securities clearinghouse to back up trades in the volatile Reddit-touted stocks. This wasn't an amount the brokerage could accommodate, because at the time it had only raised $2 billion in venture capital.

Robinhood acknowledged that blocking trading in red-hot stocks had frustrated customers, and it vowed to ensure this wouldn't happen again.

In addition to being investigated by regulators, the retail-trading platform faced more than 50 lawsuits related to the limits on meme-stock trades.

In November, a Miami district court dismissed one such retail-investor lawsuit against Robinhood and market-maker Citadel Securities. The court said there was no evidence of a conspiracy to halt meme-stock trading in this case.

Robinhood is due to report fourth-quarter results after the bell on Thursday, with analysts on average expecting it to post a $355 million loss.

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