Robinhood’s Collateral-Crunch Explanation Puzzles Wall Street
- Veterans say estimating DTCC requests is just part of business
- Yet ‘they obviously fell very, very short’ of the money needed
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A week after Robinhood Markets tried to clear the air by explaining why it slapped controversial limits on trading hot stocks, Wall Street’s risk professionals are still perplexed: How was the firm so ill-prepared for an obvious surge in collateral calls?
To the financial industry, anticipating collateral demands from hubs such as the Depository Trust & Clearing Corp. is Brokerage 101. Major firms assign teams to study the DTCC’s methodology, estimate its requests and make sure ample cash is available. Everyone grumbles, sure, but they also know what happens when firms fall short: They scramble for a lifeline or shut down. Robinhood gathered billions from backers to keep it going.