Robinhood, a go-to for young traders, benefits from short sale demand

due to a massive spike in collateral requirements needed to clear the trades, angering many of its customers.

On Tuesday, March 2, US President Joe Biden's pick to lead the Securities and Exchange Commission promised a thorough review of issues raised by the GameStop saga, as well as other issues related to retail brokers and investors., regulatory probes, and placed greater scrutiny on short selling. In response, Vlad Tenev, Robinhood's chief executive officer, called for shorter stock settlement times, which would reduce clearing collateral requirements.

He also said the idea that more shares of a stock can be shorted than there are available to trade, as was the case with GameStop, is a"pathology" that could destabilize the financial markets. Robinhood positioned itself for growth in securities lending in October 2018 by launching its own clearing broker, which acts as a go-between with the clearinghouse that settles its trades, and allows it to hold its customers' assets. The broker can then lend out securities its customers buy on margin.

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