The hot brokerage, Robinhood, has been all over the news this past week in regards to the firestorm they created amongst their customers and their allies in Washington over their putting restrictions on their customers being able to purchase certain stocks which have been on a tear upward in price recently. It seems to me the management of Robinhood could have handled the whole matter much smarter and not awaken the hornets net they did. This is what transpired certain stocks recently like GameStop have skyrocketed in price this stock has risen over 1500 percent in less than a month. So what happened is Robinhood’s Clearing House dramatically increased the collateral Robinhood had to put up when one of their customers buys one of these recently skyrocketing stocks, Robinhoods Capitalization was squeezed by this new drain on their capital so they temporarily stopped their customers from being able to buy these hot stocks and during this suspension Robinhood management went out and raised a lot of capital and lifted the suspension only partly because they still have certain buying limits on customers that own a certain level of these hot shares. This residual restriction still has a lot of Robinhood’s customers hoppin mad! This is what went on in a little deeper detail. Clearing Houses are essentially guarantors that stock transactions will go through; see it takes two or three days from when a stock purchase is actually made by a broker for the transaction to be settled where the buyer of the stock actually receives the stock and the seller of the stock actually receives the money. Clearing House organizations actually handle the actual settlement and if for some reason the buyer or seller doesn’t come through with their end of the bargain the Clearing House steps in and fulfills the breaching parties obligation. With these Clearing Houses the Broker has a deposit account and when one of the Broker’s customers makes a purchase of a stock the Broker has to deposit a certain percentage of the purchase price in that deposit account it is collateral so if the buyer isn’t later forthcoming with delivering the purchase price the Clearing House isn’t on the hook for the whole purchase price they can use the collateral to help settle the purchase transaction so the Clearing House only has to come up with the difference. With these skyrocketing stocks the Clearing House worried that there could be a big market downturn where the cash in customers brokerage accounts could be below that which is needed for the customer to pay all his or her outstanding purchase transactions. So the Clearing House started requiring the brokerage, Robinhood, to put up as collateral in these hot stocks 100 percent of the purchase price of these stocks and in order for Robinhood not to have collateral calls beyond its capital cushion it puts buying restriction on its customers for certain stocks. I think the better approach for Robinhood would have been for them to set up their trading system for their customers so that on the website for each customer they have two accounts one would be the amount of money available to trade (which would of course include the sale price of stock sales made by that customer that have not settled yet and another account which includes cash available to trade and specifically not only include the cash in the customers account but also only the cash available for trading from the customers sales where the stock sale has settled as opposed to those customer transactions where the settlement is pending. Robinhood management could then say to customers that for these stock purchases where it is a stock that has a higher one hundred percent collateral call the customer can only make that purchase where the account that has settled funds in it has the cash amount to cover the transaction, so therefore, Robinhood could just withdraw the amount of its collateral call obligation from this customer's account immediately upon the making of the transaction by the customer and so Robinhood would have no drawl on its capital by these high collateral call stock purchases. Really this is not a novel concept this writer is an older American and many Brokerages as a rule use to only let you trade stocks specifically buy stock in the amount that was in your settled funds account. It seems to me customers would understand this policy much easier than what seems to them an arbitrary and unfair restriction on their ability to buy specific stocks!