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The free-trading and popular trading app platform Robinhood said that it is planning to introduce more security checks and eligibility requirements for higher-value options trading.
One of the most popular stock trading applications in the U.S. – Robinhood – has recently been in news. Last week, the platforms 20-year-old customer Alex Kearns committed suicide citing $730,000 of losses on the trading platform. Immediately on the same day, the company issued a statement of bringing new changes to its free-trading app. Robinhood has said that it will make it more difficult to access the options trading offering on the platform. Robinhood’s co-CEOs wrote that the platform will increase its basic eligibility requirements. Speaking about the new eligibility criteria, the co-CEOs wrote:
“We are considering additional criteria and education for customers seeking level 3 options authorization to help ensure customers understand more sophisticated options trading.”
Besides, the company is also considering changing its user-interface. Robinhood will also bring improvements in in-app messages and emails associated with options spread. Robinhood’s co-CEOs Vlad Tenev and Baiju Bhatt said:
“Over the past week, our team at Robinhood has been focused on identifying how we can improve Robinhood’s customer experience, specifically around our option flows involving multi-leg exercise and assignment. We are personally devastated by this tragedy.”
Why Robinhood Has Decided to Change Options Trading
20-year old Alex Kearns committed suicide last week after losing $730,000 in trading on the platform. In a note to his family, Alex blamed Robinhood for allowing him to pile too much risk. The young man claimed that he should have sold all the orders. However, he had “no clue” of what he was doing.
But one of Alex’s relatives said that he must have misunderstood the financial statement by Robinhood. As per the relative, the $730,000 might reflect the other side of the options trade which isn’t settled.
The free-trading Robinhood app has been one of the most popular platforms among the young crowd in the U.S. With 1 million users in 2016, Robinhood serves over 10 million customers as on date. Speaking upon this incident, the co-CEOs also wrote:
“It is not lost upon us that our company and our service have become synonymous with retail investing in America, and that this has led to millions of new investors making their first investments through Robinhood. We recognize this profound responsibility, and we don’t take it lightly. Our aspiration is to innovate, lead, and go beyond the status quo.”
Let’s hope that the timely reaction from the side of the company will help to prevent any possible tragedies related to the trading.