Amid all the overdone excitement about GameStop, AMC et al last week, the trading platform that some think enabled the overdone excitement, Robinhood, began to receive a lot of criticism. Supposedly its eventual decision to disallow purchases of GameStop, American Airlines and others signaled “cronyism” whereby the market app for the little guy protected hedge funds from too much buying, and ever higher share prices. Don’t buy the assumptions.
For one, it quickly became apparent why Robinhood stopped trading in certain companies: it apparently lacked the capital to process the volume of trades coming its way. Capital requirements foisted on it by regulators helped make its decision a certainty.
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