Robinhood and other Interactive Brokers restricted trading on highly volatile stocks: GameStop, Blackberry, and many others.
About one day after the historic chaos that happened on Wall Street due to the result of social media stock tips to cause unusual trends, Robinhood along with other trading platforms have restricted trading in shares of companies such as GameStop (NYSE: GME), BlackBerry (NYSE: BB), and many other companies. For what is known as the “social media driven trade frenzy”, many brokerages decided to set limitations to cope with the controversy and backlash which came to light after the spike on January 27th, 2021.
The battle between short sellers and individual investors was seen all over social media which led to trading restrictions to be put in place, leaving many traders stunned.
With such limitations, frustrated day-traders set foot to take legal action on Robinhood, but in all honesty, there won’t be much luck there. Several federal suits on Thursday were proposed to demand Robinhood for reinstating trading of corporations including Blackberry (NYSE: BB), GameStop (NYSE: GME), Nokia (NYSE: NOK), AMC Entertainment Holdings (NYSE: AMC), and many more. Earlier Thursday, interactive brokers such as Robinhood took matters into their own hands to curve the amount of trading done on such high-spiked stocks after showing great volatility in the past days.
Many users are claiming losses due to restrictions made by interactive brokerages. However, it is stated in customer and user agreements that brokerages and interactive firms do in fact have authority to restrict and limit transactions. All of those claims are listed when signing agreements to said brokerages.
In black and white, there are printed rules saying brokerages have the power to block and restrict trades at any given time. Despite the set in stone rules, users are furious with the restrictions caused on the volatile stocks from the last week.
The rules and regulations are causing traders to have limited ability to invest and manipulate the market.
On Thursday, January 28th 2021, GameStop (NYSE: GME) dropped 44%, and AMC (NYSE: AMC) dropped 57%. Thus, resulting in the wave of profitability and hopes for traders who wanted to join the wave, to turn into disappointment.
Wednesday, January 27th 2021 was definitely a surprise for many people with the unusual gain from GameStop (NYSE: GME), BlackBerry (NYSE: BB), AMC Entertainment (NYSE: AMC), Express (NYSE: EXPR), Koss Corporation (NASDAQ: KOSS), and Nokia (NYSE: NOK).
With many traders looking to join the wave or find the next GameStop (NYSE: GME) stock through online Internet forums similar to the Reddit group, r/wallstreetbets. The forum has gained more than 3 million followers in the last week after traders noticed the massive impact social media had on the stock market.
The “war” between social media and Wall Street investors continue as the trends and volatility of these stocks continue to fluctuate causing record braking results on the stock exchange. The heated conversations and controversies between people is causing great tension for investors as stock prices continue to change rapidly.
Is it fair for brokerages to restrict trading on these companies? Let us know what you think below!
Written by: Karthik Ganapathiraju, Wil Peters, and Aneeshan Balakaran
