Some major brokerage houses have begun to respond to a frenetic surge in the price of shares of certain companies that has been attributed to rabid buying by individual investors inspired by social-media platforms.
On Wednesday, TD Ameritrade said it was restricting trading in 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.”
Charles Schwab, which bought TD Ameritrade but operates it as an independent retail brokerage, said that it has tightened margin requirements in some of those stocks, including GameStop.
A Schwab spokeswoman said that the platform changed its margin requirements, limiting 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 gathering in online chat forums have gone on 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 including Robinhood (which in its initial conception was meant to be a social platform organized around the trading of stocks), 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 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 GameStop 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, and AMC Entertainment, has been spilling over into other areas of the market, with the likes of Bed Bath & Beyond BBBY,
Read: It isn’t just GameStop: Here are some of the other heavily shorted stocks shooting higher
News alert: Outsized stock-market movers: AMC, up 225%; Express, up 140%; GameStop, up 88%
Recent volatile trade has made some on Wall Street uneasy, with worries of a rapidly inflating bubble. The Dow Jones Industrial Average DJIA,
Regulators have been mindful of the recent action, with William Galvin, Massachusetts’s secretary of the commonwealth, 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.”
