- Robinhood told traders of the day on Thursday, hours before the market opened, to increase their cash buffer on many widely held stocks, as they could face an account loss.
- The trading platform said that since Friday the U.S. To “help” customers to avoid increased volatility before the election, the user will have to increase the minimum amount they can keep in their account.
- “If you keep any of the affected stocks at a margin, your purchasing power may be reduced or your account may run into deficit once these changes are implemented,” Robinhood said.
- “If you don’t resolve the margin call, we may need to sell some or all of your stock to cover the margin call,” he says.
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Robinhood told its users on Thursday to increase their cash reserves on many widely held stocks, before the market opens.
The retail trading platform, which leads Commission Free Stock and ETF Trading, said it would increase the margin-maintenance requirements of stocks affected by election-related volatility to “protect” consumers.
PKMC, a one-day trader who writes a not boring newsletter, Posted Robinhood’s message in a tweet 9:42 p.m. Regular trading on the New York Stock Exchange begins at 9:30 p.m.
Some people on Twitter condemned the move. “I’m not sure how this can be legal,” he said. One person said.
Investing on margins means that traders can borrow money from Robinhood as a loan to buy stocks and options, thereby accelerating the return on investment. Margin maintenance, meanwhile, requires the user to have at least that amount in their account to avoid blocks with robinhood.
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“If you keep any of the affected stocks at a margin, your purchasing power may be reduced or your account may run into a deficit once these changes are implemented,” Robinhood said.
Robinhood said that if a user falls short of the minimum and does not deposit additional funds to increase the value of their account by the end of the trading day on Friday, he will issue a margin call.
“If you don’t resolve the margin call, we may need to sell some or all of your stock to cover the call call,” he says.
It is common in futures exchanges for margin requirements as market volatility increases, as traders are more likely to increase losses that they cannot cover.
Earlier this year, stock market volatility reached its peak after the financial crises of 2009 and 2009, as investors around the world cut equities to hold cash, government bonds and even gold.
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Also on Thursday, Bloomberg reported that hackers gained access to about 2,000 trading accounts on Robinhood’s platform.
This week, the company sent a push notification through its app, asking customers to use dual-factor authentication. “Security is a high priority and we take it very seriously,” a Robinhood spokesman told Business Insider.
Coronavirus uncertainty has spread to Robinhood’s popularity amid a boom in retail trade as part of market volatility. Late down withdrawals earlier this year stopped most commercial sports, for example, and encouraged some amateur investors to try day trading.
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