Robinhood needed $3 billion to cover risky trades, its chief told Elon Musk. – The New York Times

“This has been a very surreal weekend and week for me.”

So said Vlad Tenev, the chief executive of the online brokerage firm Robinhood, in a public conversation with — of all people — Elon Musk about the challenges his company has faced amid the run-up in stocks like GameStop’s, the DealBook newsletter reports.

Mr. Tenev opened up on the social network Clubhouse late on Sunday about what led Robinhood to impose curbs on trading shares in GameStop and other companies last week, drawing outrage from customers and politicians alike.

Last Thursday, an arm of the Depository Trust and Clearing Corporation, Wall Street’s main clearinghouse for stock trades, had demanded $3 billion in additional collateral — “an order of magnitude” more than usual, Mr. Tenev said — to cover risky trades by its customers.

That demand was later reduced to about $700 million, but Robinhood was still forced to draw down credit lines from banks and raise $1 billion from existing investors.

“This was nerve-racking,” Mr. Tenev said.

Mr. Tenev said the clearinghouse’s decision was based on “an opaque formula,” but sought to dispel persistent rumors that Wall Street elites were behind the move. Mr. Musk, a noted provocateur on Twitter, asked whether “something really shady” was behind the collateral demand. “You’re getting into conspiracy theories a little bit,” Mr. Tenev answered, and added that other brokers were also asked to post additional cash.

“We had no choice, in this case,” Mr. Tenev said. “We had to conform to regulatory capital requirements.”

The Robinhood chief also disputed speculation that his brokerage firm had imposed the trading curbs to aid Wall Street partners, including the big financial firm Citadel, whose brokerage arm executes most of its trades and whose hedge fund had invested in a fellow investment firm that had been betting against GameStop’s share price.

When Mr. Musk asked whether Robinhood was “beholden” to Citadel, Mr. Tenev shot back, “That’s just false.”