This is an evolving story. Check back for updates
Brokers have taken steps to restrict the trading of GameStop shares and options and other related names caught in a spate of trading activities that captured the attention of Wall Street and caused huge losses to hedge funds. In some cases, investors would only be able to sell their positions and not open new positions.
Free stock pioneer Robinhood and Interactive Brokers on Thursday both made efforts to curb wild trading activity in heavily abbreviated names such as GameStop, AMC Entertainment, Koss and more.
Initially, the shares of GameStop reversed the course and quickly slipped to a negative territory as the trading restrictions spread. The stock, which at one point traded above $ 500, was below $ 290 a share shortly after the opening bell.
However, the retailer’s share of video games increased by 9%.
“We are constantly monitoring the markets and making changes where necessary. In light of the recent volatility, we are limiting transactions for certain securities to the closing of positions, including $ AMC, $ BB, $ BBBY, $ EXPR, $ GME “$ FOOD, $ NAKED and $ NOK. We have also increased margin requirements for certain securities,” Robinhood said in a statement.
Increasing the margin requirements increases the amount of money an investor with leveraged financing and derivatives should have in their brokerage account after a stock purchase.
Interactive brokers traded AMC, BB, EXPR, GME and KOSS options, just because of the extraordinary volatility in the markets, yesterday afternoon (27/01/2021). % margin and short share positions will require 300% margin until further notice. We do not believe that this situation will disappear before the stock exchanges and regulators stop or place certain symbols in liquidation only. as justified, ”Interactive Brokers told CNBC.
Shares in GameStop rose more than 400% this week and nearly 1,750% this year, thanks to the skilled retail investors in the Reddit chat rooms trying to keep it with Wall Street people. The beginners stack in names heavily hedged by hedge funds, pushing the stocks higher as the institutions try to cover their losses. Shares of AMC Entertainment rose nearly 300% this week.
The steps taken by Robinhood and Interactive Brokers on Thursday were even more drastic than what brokers did earlier in the week. TD Ameritrade and Charles Schwab increased margin requirements on Wednesday.
Robinhood customers took to Twitter to express their outrage over the decision. Robinhood has made a name for itself through its mission to democratize investments for all. The Silicon Valley launch with more than 13 million users was a pioneer in free trade, forcing the entire brokerage industry to abandon commissions in late 2019.
“Either #Robinhood enables people to trade freely in the market, or they lose millions of users #ToTheMoon #GME #AMC #NAKD,” one Twitter user wrote.
“Robinhood canceled stock orders on #gme #amc #NOK etc …. There must be a class action lawsuit. I thought we had a free market. So Wall Street is good that I’ll lose hundreds of dollars investors can not be called out about their risks …. #wallstreetbets, “said another user.
Atom Finance told CNBC that 10.96% of its customers traded with GameStop’s shares on Robinhood on Monday when the wild moves began. According to the research firm, 11% of Interactive Broker clients trade with GameStop.