Robinhood restricts trading in GameStop, other names involved in frenzy

[BUtterfield 8 41,818]

Retail brokerages restricted trading on Thursday in GameStop and other stocks caught in a frenzy that has captivated Wall Street and caused big losses for hedge funds.

Free-stock trading pioneer Robinhood and Interactive Brokers said that in some cases, investors would be able to sell only their positions and not open new ones. Both brokerages raised margin requirements on certain securities.

After the announcement, shares of GameStop initially reversed their gains, sliding quickly into negative territory. The stock, which traded above $500 at one point in premarket trading, was below $290 per share shortly after the opening bell. About two hours after the Robinhood announcement, GameStop was down 40% from Wednesday’s closing price.

In addition to GameStop, the wild trading affected other heavily shorted stocks, including AMC Entertainment, BlackBerry and Koss.

“We continuously monitor the markets and make changes where necessary. In light of recent volatility, we are restricting transactions for certain securities to position closing only, including $AAL, $AMC, $BB, $BBBY, $CTRM, $EXPR, $GME, $KOSS, $NAKD, $NOK, $SNDL, $TR and $TRVG. We also raised margin requirements for certain securities,” Robinhoodsaid in a statement.

Raising margin requirements increases how much money an investor using leverage and derivatives must have in their brokerage account after a stock purchase.

Interactive Brokers said: “As of midday yesterday, Interactive Brokers has put AMC, BB, EXPR, GME, and KOSS option trading into liquidation only due to the extraordinary volatility in the markets. In addition, long stock positions will require 100% margin and short stock positions will require 300% margin until further notice. We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only. We will continue to monitor market conditions and may add or remove symbols as may be warranted.”

Shares of GameStop ballooned more than 400% this week and nearly 1,750% this year thanks to emboldened retail investors in Reddit chat rooms trying to stick it to Wall Street pros. The rookies are piling into names heavily shorted by hedge funds, squeezing the stocks higher as the institutions rushed to cover their losses. Shares of AMC Entertainment are up nearly 300% this week.

The steps by Robinhood and Interactive Brokers taken Thursday were more drastic than what brokerages did earlier in the week. TD Ameritrade and Charles Schwab raised margin requirements on Wednesday.

Robinhood customers took to Twitter to express their outrage surrounding the decision. Robinhood has made a name for itself through its mission to democratize investing for everyone. The Silicon-Valley start-up with more than 13 million users pioneered free trading, forcing the entire brokerage industry to drop commissions in late 2019.

The Reddit crew is banding together to rally certain stocks in what some say is pushback against the Wall Street establishment.

Hedge fund Melvin Capital closed out its short position in GameStop on Tuesday after taking huge losses as a target of the army of retail investors. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin’s hedge fund to shore up its finances. 

“This is a big problem of the e-brokers’ own making as they are so beholden to their payment for order flow overlords and shows the real fragility of the zero commission business model,” said Timothy Welsh, founder and CEO of wealth management consulting firm Nexus Strategy.

Taking payments for order flow from Wall Street firms is a controversial, but legal practice done by most electronic brokers. For Robinhood, it’s the biggest revenue source.

“The high-frequency traders and hedge funds that could predictably trade against the ‘dumb’ money from Robinhood traders and pay Robinhood for that information are now realizing that the order flow they are buying is no longer predictable or safe for them. In fact , it now includes thermonuclear bombs in the form of GameStop and AMC,” Welsh said.

Source

 

[littlepotter 76,610]

Don't we love to see wall street in shambles 

[JusKeepBreathin 19,311]

This is kinda crazy. There was no real reason for gamestop to shoot up like that. It was selling for more than Apple at one point. 

[FATCAT 60,888]

1 minute ago, JusKeepBreathin said:

This is kinda crazy. There was no real reason. For gamestop to shoot up like that. It was selling for more than Apple at one point. 

It was because people were buying it very quickly, the price goes up when there's demand. 

[Knife 7,079]

I don't have a horse in this race, but it's funny to see them stepping in to help these big corporations.

[LaLa 19,898]

Wow, how can Robinhood justify this? Deciding who can buy what to shore up hedge funds, gross 

[JusKeepBreathin 19,311]

13 minutes ago, littlepotter said:

Don't we love to see wall street in shambles 

We don't love this. We don't want another great depression. We want stricter laws in Wall Street. We don't want an economy in shambles. 

[JusKeepBreathin 19,311]

7 minutes ago, FATCAT said:

It was because people were buying it very quickly, the price goes up when there's demand. 

I know that part. I meant there was no reason as to why it was being purchased so quickly.

[Nano 3,744]

The market is going wild today. My stocks have been all over the place. It is fun to see Wall Street get their a$$ handed to them, but there are ripple effects that are rocking the market right now 

[Morphine Prince 109,655]

Market manipulation. 

They are mad the WRONG PEOPLE are making money. 

Rich people break the law EVERY DAY. 

 

[JusKeepBreathin 19,311]

6 minutes ago, LaLa said:

Wow, how can Robinhood justify this? Deciding who can buy what to shore up hedge funds, gross 

If Twitter can kick Trump out. Robinhood can justify this. Use another trading site if you don't like it. 

[Morphine Prince 109,655]

 

[JusKeepBreathin 19,311]

1 minute ago, Morphine Prince said:

Market manipulation. 

They are mad the WRONG PEOPLE are making money. 

Rich people break the law EVERY DAY. 

 

Both are bad. No better than an insurrection at the capitol. Millions of people depend on their 401k's and IRA's after they retire. 

[Morphine Prince 109,655]

1 minute ago, JusKeepBreathin said:

Both are bad.

Nope. Regular people buying a stock is not a crime.

 

[Morphine Prince 109,655]

The rich are all about the “free market” until they can’t profit from it.