Because of T+2 settlement when you buy/sell stock the actual exchange of shares and money only happens 2 business days later. If you sell a stock and then buy a different stock the same day you're trading with money that technically is not in your account yet, even in a cash account.

It's fine because you wrote promissory note to pay $X in 2 days, but you're also holding a promissory note saying you are owed >=$X in 2 days. (And promissory notes to receive/deliver the respective shares). And there's a central clearinghouse enforcing this.

But part of the reason why it's low risk is that the clearinghouse requires brokers to put up large amounts of cash as collateral to ensure they can pay all their promissory notes even if they go bust. They are fairly conservative in their collateral requirements.

So when all your customers are trading a highly volatile stock with a notoriously high rate of failure to deliver (this is a whole other discussion), the clearinghouse gets antsy and may ask you to put up ridiculously large amounts of cash as collateral.

There have been several Congressional Hearings since January’s drama, and something definitely doesn’t add up.

Robinhood’s CEO stated, under oath, that they switched off buys of GME following discussions with the DTCC.

In a later hearing, the head of the DTCC stated — again, under oath and on the record — that Robinhood’s decision was entirely their own, and they had never spoken with Robinhood about it.

Someone is lying.

I would urge anyone interested in this (ongoing) saga to read this excellent investigative journalism piece here:

https://prospect.org/power/how-the-gamestop-hustle-worked/

The blame should go toward the DTCC who increased their margin requirements on buyers for seemingly no reason other than to coerce everyone into stopping retail investors from squeezing the rich shorts.