Not so merry men

29 January 2021 By Richard Beales Follow @richardbeales1

The online broker’s restrictions on trading of stocks like GameStop look at odds with its mission to democratize finance. Yet Robinhood’s rush to raise cash shows that there’s a side to zero-cost trading that users don’t see. Safe trading costs money, one way or another.

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Online broker Robinhood Markets raised more than $1 billion of fresh capital from existing investors, according to a New York Times report. Robinhood’s existing backers include venture capital firms Sequoia Capital and Ribbit Capital, who came together late on Jan. 28 to offer the emergency funding.

The firm also drew on bank credit lines to ensure it had the capital required to keep allowing its clients to trade stocks like GameStop and AMC Entertainment. Robinhood and other brokerages had restricted the creation of new positions in a range of stocks earlier on Jan. 28 after huge runups in their prices.

Robinhood on Jan. 29 restricted some trading in cryptocurrencies in light of “extraordinary market conditions,” according to CNBC.

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