Robinhood Might Face a Class Action for Repeated Trading Outages

A group of Robinhood traders has approached a US court seeking certification of class against the Trading Platform Trading Platform In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real In the FX space, a currency trading platform is a software provided by brokers to their respective client base, garnering access as traders in the broader market. Most commonly, this reflects an online interface or mobile app, complete with tools for order processing.Every broker needs one or more trading platforms to accommodate the needs of different clients. Being the backbone of the company’s offering, a trading platform provides clients with quotes, a selection of instruments to trade, real Read this Term for its repeated outages during the market Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term of spring 2020.

As reported by Law360, the class certification represents nearly 7 million funded account holders on the commission-free brokerage platform. Accounts with at least one equity or option position during the March 2 outage can join the lawsuit if it is granted by the court.

The representatives of the proposed class argued in a California court that the trading platform breached its contract and fiduciary obligations to customers with the repeated outages. Furthermore, they alleged a breach of the regulatory requirements by the broker that acted in a ‘reckless, profit-driven manner’.

Repeated Outages

Robinhood faced multiple outages during March 2020 when the stock market was extremely volatile. One of the outages on the day of a major market rally even lasted for an entire trading day, barring its clients from participating in trading.

“Plaintiffs present a fulsome damages analysis demonstrating losses well into the tens of millions, before punitive damages and interest,” the proposed class stated in the motion filed on Friday.

“Put plainly, Robinhood needs the court's intervention to protect customers.”

Traders, who moved against the broker, said that their damages model in economic losses is in the ‘form of a loss of flexibility, i.e. investors were unable to make trades to capitalize gains, to mitigate losses and alter the risk profile of their investments’.

In addition, it will consider losses as customers could not open any new positions and the open positions that could not be closed during the outage.

“Given Robinhood's long track record of outages, without injunctive relief, there is nothing to ensure that Robinhood will change both its organizational and operational structures so that Robinhood's users will be able to trade efficiently without undue delay and unnecessary risk,” the motion added.

Earlier, Robinhood faced tens of millions of dollars in penalties brought against it by multiple US regulators. However, the popularity of cryptocurrencies on the platform is fading due to the rising American competition.