Robinhood Will Restart ‘Limited’ Trading In Meme Stocks GameStop, AMC As Reddit Rally Unravels
Following a slew of backlash from everyone including government officials and billionaires, popular online brokerage Robinhood, which along with other trading platforms facilitated much of the Reddit-fueled trading mayhem, has backtracked from its decision to bar buying of the meme stocks that sparked the mind-blowing Reddit rally in shares heavily shorted by Wall Street’s elite.
In a Tweet thread Thursday afternoon, Robinhood CEO Vlad Tenev, one of the firm’s two billionaire cofounders, announced that starting Friday, the platform would once again allow “limited buys” of the eight securities for which it previously stalled trading.
“In light of recent volatility,” Robinhood said earlier Thursday it was restricting trading of meme stocks including GameStop, AMC Entertainment, BlackBerry and Bed Bath & Beyond—all among those seeing eye-popping gains this week as Reddit traders pump up prices with massive buying.
Other stocks temporarily barred on the platform include Koss Corp., Express, Nokia and Naked Brand; Robinhood said it was only allowing such positions to be closed.
Tenev said the move was a “risk-management decision” due to financial requirements from the Securities and Exchange Commission that fluctuate based on volatility in the markets, implying that a surge in margin trading may have strained the firm’s cash on hand.
Interactive Brokers has also barred options trading for many of the same stocks–AMC Entertainment, BlackBerry, Express, GameStop and Koss–allowing only liquidation for such positions; the firm is also requiring long positions to be fully covered and a 300% margin for short positions “until further notice.”
Shares of GameStop and AMC tanked 44% and 57%, respectively, Thursday.
“We continuously monitor the markets and make changes where necessary,” Robinhood said in a statement Thursday. “In light of recent volatility, we are restricting transactions for certain securities to position closing only. . . . Amid significant market volatility, it’s important as ever that we help customers stay informed.”
Robinhood faced bipartisan fury from elected officials over its decision to halt meme stock purchases. Rep. Alexandria Ocasio-Cortez (D-NY) tweeted that Robinhood should be investigated for halting GameStop and other trades “while hedge funds are freely able to trade the stock as they see fit,” and Republicans like Sen. Ted Cruz (R-Tex.) came out in agreement. Meanwhile, speculation on social media began circulating nearly immediately after the announcement that Robinhood’s decision to stop trading meme stocks was motivated by its relationship with hedge funds and other Wall Street shops. “To be clear, this decision was not made on the direction of any market maker we route to or other market participants,” Tenev said in the Thursday tweet thread.
What To Watch For
“We do not believe this situation will subside until the exchanges and regulators halt or put certain symbols into liquidation only,” Interactive Brokers said in a statement Thursday, adding that it will “continue to monitor market conditions and may add or remove symbols” as it deems warranted. The SEC says it is “monitoring” the situation but hasn’t provided additional guidance.
Once again crippled by the retail-trading frenzy, major brokerages dominated the list of outages tracked by DownDetector Thursday morning, with Robinhood, E-Trade, Charles Schwab and Fidelity all among those experiencing issues around the start of trading.
According to a new report by the Harvard College Consulting Group, 31% of investors under the age of 24 are looking to “make quick cash,” while roughly the same percentage use Reddit to inform trading. Only about 58% of those are making revenue, and a large majority (65%) of those looking to “make quick cash” fail to generate anything at all.
Not Just GameStop: Here Are The Meme Stocks WallStreetBets Traders Are Pumping Up During This ‘Extremely Erratic’ Reddit Rally (Forbes)
Dow Plunges 650 Points, Posting Worst Loss In 3 Months As Reddit Traders Fuel ‘Market Nonsense’ (Forbes)