Number of words: 221<\/p>\n\n\n\n
The online trading app Robinhood became a cultural phenomenon and a Silicon Valley darling with a promise to wrest the stock market away from Wall Street\u2019s traditional gatekeepers and \u201clet the people trade\u201d \u2014 making it as easy to put millions of dollars at risk as it is to summon an Uber.
This past week, in the middle of a market frenzy pitting amateur traders against hedge fund bigwigs, that veneer began to chip. As it turned out, Robinhood was at the mercy of the very industry it had vowed to upend.
The frenzy morphed into a crisis when legions of armchair investors on Robinhood, who had been buying up options and shares of GameStop, a video game retailer, enlarged those bets and also began making big trades in other stocks, including AMC Entertainment.
As the trading mania grew, the financial system\u2019s risk reduction mechanisms \u2014 managed by obscure entities at the center of the stock market called clearinghouses \u2014 kicked in on Thursday, forcing Robinhood to find emergency cash to continue to be able to trade. It had to stop customers from buying a number of heavily traded stocks and draw on a more than $500 million bank line of credit. On Thursday night, the company also took an emergency infusion of more than $1 billion from its existing investors.
Excerpted from https:\/\/www.moneycontrol.com\/news\/business\/markets\/the-silicon-valley-startup-that-caused-wall-street-chaos-6421041.html<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"