Vlad Tenev rejected the speculation while being grilled by billionaire Tesla CEO Elon Musk during an appearance on the invite-only app Clubhouse on Sunday night, which came after retail investors mobilized on Reddit shook the U.S. markets by pouring money into GameStop and other companies in the crosshairs of short sellers.
Tenev said rumors that the financial services giant Citadel or other market makers had put pressure on Robinhood to restrict trades last week was “just false.”
He said it was a “clearing house decision” based on capital requirements needed as a result of unprecedented trading volume, and brushed off the suggestion that Citadel and other market makers could have influenced the clearing house in question.
According to Tenev, the National Securities Clearing Corporation (NSCC) had demanded it file a deposit of around $3 billion to cover the surge in trading, conceding the figure was an “order of magnitude more” than what the number typically would be.
As reported by Yahoo Finance, under the U.S. financial system Robinhood trades pass through the clearing house until they settle. Until then, the clearing house puts up the needed collateral on behalf of the brokerage. Volatility drives those costs up.
Musk noted the high financial pressure and suggested Citadel would possibly have a “strong say” in who was in charge of the NSCC, theorizing it could be open to collusion as it’s an industry consortium and not a government regulatory agency.
“I don’t have any reason to believe that, I think that’s just like, then you are getting into the conspiracy theories a little bit. I just have no reason to believe that’s the case,” the Robinhood boss countered, bringing an end to the conversation.
Last week, subscribers of a subreddit called r/WallStreetBets had coordinated to invest money into stocks that companies, including Citadel and Melvin Capital, had been betting against. The rally forced hedge funds to exit their short positions.
Trading apps were criticized after restricting the purchasing of stocks at the center of the surges, as some suggested the decision was urged by financial institutions.
Sequoia Capital, a venture capital firm, publicly denied the claims, tweeting: “Sequoia did not pressure Robinhood to halt the trading of any stocks. This rumor is completely false.” Citadel also denied putting pressure on Robinhood, The Guardian reported.
Grilling Tenev on why the NSCC’s deposit request was so high, Musk asserted “people demand an answer.” The Tesla boss questioned: “Did something maybe shady go down here, it seems weird you would get [the deposit request] out of nowhere?”
He jokingly asked if Tenev was being held hostage and noted it seemed like the NSCC as an organization had too much control over the mobile trading app.
Musk said: “It sounds like this organization calls you up and they basically have a gun to your head, either hand over this money or else. Basically, what people are wondering is, did you sell your clients down the river or did you have no choice? In response, Tenev told Musk that he “wouldn’t impugn shadiness” to the NSCC’s actions last week.
