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Robinhood has to pay a dealer round $30K for limiting trades on sure shares

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Jose Batista, a retail investor, was awarded nearly $30,000 from Robinhood after submitting a criticism utilizing the Monetary Business Regulatory Authority’s (or FINRA’s) arbitration service. His case could find yourself being an instance for different retail merchants who’re nonetheless upset on the buying and selling platform’s actions in January of 2021.

On January twenty eighth, Batista was planning on promoting his inventory in Koss and Categorical — however Robinhood had placed trading restrictions on them, limiting the quantity of shares its customers might purchase. This meant that Batista needed to watch helplessly as the costs of his inventory fell to just about half of what they had been the day earlier than the restrictions had been put in place, according to MarketWatch. “Seeing it plummeting and plummeting, I felt horrible, after which I felt caught,” Batista told Motherboard.

Robinhood’s restrictions had been due to the push of trades occurring round GameStop’s inventory, which had been partially pushed by retail traders. In January 2021, the corporate was hyped up by users of the WallStreetBets subreddit, and its inventory rocketed up in worth. This finally result in short-term market-wide trading halts and even seemingly caused technical difficulties at several brokerages. That included Robinhood, which restricted trades on not simply GameStop however different shares comparable to AMC, Blackberry, Koss, and Categorical.

The buying and selling restrictions meant Robinhood customers couldn’t buy any shares of the main meme stocks. It additionally heavily limited the variety of shares its customers might purchase in different corporations — at one level, customers might solely purchase shares of Categorical in the event that they owned lower than 5 already. For Koss, you had been solely allowed to purchase a single share. The freeze attracted dozens of user lawsuits, review bombs, and even attention from lawmakers. A lot of the different lawsuits and investigations haven’t ended up going anyplace, although, in keeping with MarketWatch and Batista’s lawyer.

The arbitrator doesn’t give a rationale for Batista’s win. Nonetheless, Batista’s lawyer wrote a post theorizing about why they had been profitable the place others had failed: as a result of the case centered on “Robinhood’s insufficient liquidity administration practices and monitoring of its counterparty danger.” The submit additionally says that they “attacked, head-on, the notion that Robinhood’s buyer settlement provides it unfettered proper to limit buying and selling for any purpose, at any time.”

To different merchants, the case might characterize blood within the water. Whereas arbitration selections don’t set authorized precedent, that means that one other arbitrator might rule a distinct method in an nearly equivalent case, Batista’s lawyer requires different Robinhood clients to contact the agency. A few threads on stock-related subreddits have already identified the chance that the case might be used for example to attempt to get a payout from Robinhood.

Along with the $29,460.77 in damages Batista will obtain, Robinhood can even be on the hook for a couple of extra grand: the arbitrator ordered it to pay nearly a 12 months’s curiosity on the cash. Robinhood will also have to pay filing and another charges.

Robinhood, the mother or father firm of the 2 entities named within the dispute, declined to supply an on-the-record response for this story. These two entities are Robinhood Securities and Robinhood Monetary. Each are members of FINRA, although the mother or father firm just isn’t — so the ruling applies to these two authorized entities inside Robinhood itself.

Whereas GameStop’s inventory led to the commerce restrictions, it’s not what Batista filed his criticism about. Batista did personal GameStop shares on the time however had no plans of promoting them, in keeping with MarketWatch. Some Redditors have urged him to place his winnings again into GameStop, however he as an alternative plans on investing the cash into his trucking enterprise and utilizing it to pay for childcare, according to Motherboard.

For Batista, it looks like a contented finish to the saga — perhaps his story might be tailored as a part of one of many bajillion movies, documentaries, and TV shows which are supposedly within the works in regards to the GameStop / WallStreetBets bonanza.

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