Robinhood Drama Puts Trade Settlement Time In The Spotlight

Law 360 – In a story about Robinhood and trade settlement, Healthy Markets Executive Director Tyler Gellasch is quoted saying “It’s amusing to see that former Chairman Clayton is now on board with reducing settlement times,ju st weeks after leaving a job that he held for four years where he could have done something about it.” Gellasch also said he is skeptical about Tenev’s motivations, saying that while shortened settlement times are a good thing, Robinhood has used the issue as a “sideshow” to distract from its own failings on Jan. 28. “Shortening the settlement cycle will reduce systemic risks, particularly in times of volatility, but it
had nothing to do with what happened to Robinhood,” Gellasch said. “It’s not surprising to anybody that a clearinghouse would make margin calls during extreme volatility and heavy trading. What’s surprising and disappointing is that Robinhood doesn’t seem to have been prepared to back up its own customers’ trading.” According to Gellasch, last month’s buying restrictions actually stem from Robinhood’s own business
model of giving millions of customers access to “complex, risky products” and incentivizing “large numbers of small, extraordinarily high risk trades” without necessarily having the capital to back them up. (Full Story).

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