Some major brokerage houses have begun to respond to a frenetic surge in the price of shares of companies that has been attributed to rabid buying by individual investors on social-media platforms.
On Wednesday, TD Ameritrade said it was restricting trading for GameStop GME,
“In the interest of mitigating risk for our company and clients, we have put in place several restrictions on some transactions in $GME, $AMC and other securities,” a spokeswoman for TD Ameritrade told MarketWatch, referring to the ticker symbols of the companies.
“We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors,” she said.
Charles Schwab, which bought TD Ameritrade but is still operating as an independent retail brokerage platform, said that it has tightened margin requirements in some of those trading names, including GameStop.
A Schwab spokeswoman said that the platform changed its margin requirements, or how much an investor can borrow, on Jan. 13 and said it has placed “restrictions in place on certain transactions in GME and other securities.”
The restrictive moves come as shares of videogame retailer GameStock have shot up 1,600% in January, as traders gathered in online chat forums to take large bets on the stock using options, often out-of-the-money calls that pay off only if the stock rises in value over a set period.
Traders on sites like Reddit’s WallStreetBets, and using trading platforms like Robinhood, have clashed with hedge-fund investors, sparking a battle between prominent Wall Street short sellers and individual investors in GameStop shares.
A Robinhood spokeswoman said that officials at the popular trading platform “continuously monitor the markets and adjust as we feel necessary for the benefit of our customers.”
Robinhood said it also moved raised requirements for GME and AMC to 100%, emphasizing that Robinhood doesn’t allow shorting of equities or allow customers to trade naked options.
However, the recent run-up in GameStop has been spilling over into other areas of the market, with shares of companies like AMC Entertainment also surging in price on Wednesday, along with shares of Bed Bath & Beyond BBBY,
Read: It isn’t just GameStop: Here are some of the other heavily shorted stocks shooting higher
The recent volatile trade has even made some on Wall Street uneasy, with worries of a bubble. The Dow Jones Industrial Average DJIA,
Regulators have been mindful of the recent action, with William Galvin, the Secretary of the Commonwealth of Massachusetts, telling Barron’s in an exclusive statement on Tuesday that he was watching the action play out.
“This is certainly on my radar,” Galvin said. “I’m concerned, because it suggests that there is something systemically wrong with the options trading on this stock.”
