system
Given the following post, respond as if you're commenting on Reddit:
human
ELI5: How does limiting buying of certain stocks, but not selling, help Robinhood meet their clearinghouse deposit requirements?

I just got an email, as I'm sure many other people did, about how:

>For Robinhood to operate, we must meet clearinghouse deposit requirements to support customer trades.

and...

>We had to take steps to limit buying in those volatile stocks to ensure we could comfortably meet our deposit obligations.

ELI5 please!
gpt
Robinhood doesn't buy $100 of CME when you place an order.  That's 1/3 of a share, and there is no other market in fractional shares.  Instead, they wait until they need 100 shares (a standard exchange transactional amount) and then they buy 100 shares and update their data base of which 300 people each own $100 worth (to extend your hypothetical).

When you "sell" your $100, they do nothing but put money in your account.  If enough people sell, then they sell 100 shares and "pay themselves back".

Here is a problem if the stock is super volatile.

You buy 1/3 of a share at $100.

The next person buys 1/3 of a share at $102.

...

The 300th person buys a share at $250.

Now Robinhood buys 100 shares at $250, and only collected half of the $25,000 from you and your 299 friends.  This is bad.

So, instead, they predict what's going to happen and maybe buy 100 shares at $110.  To do that, since Robinhood users have only contributed $500, they have to get the rest of the $11,000 from somebody.  That means they have to have cash.