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Retail-trading platforms acted to curb the meme-stock frenzy Thursday as the run on GameStop, AMC, BlackBerry and others continued. If you’re just tuning in to the story, start with this primer from my colleague Murad. Here’s the latest:
Robinhood gives to the rich: Popular day-trading platform Robinhood blocked customers from buying several dark-horse stocks, and increased margin requirements for certain securities, citing volatility in the market. “We continuously monitor the markets and make changes where necessary,” the company noted in a blog post confirming the move. Short sellers are still able to buy the stock to close their positions. The restrictions sent volatile stocks plummeting on Thursday, before rallying again. GameStop closed the day at US$193.60 after reaching a high of US$469.42 earlier in the day. BlackBerry stock also collapsed—from a high of $35 per share on Wednesday to a low of $17.65—and has barely picked up. The decision incited a backlash against the platform, including a class-action lawsuit, and sent customers looking for alternatives to Robinhood’s no-fee service that claims to “democratize finance for all.”
Rival conflicted on halting trades: Webull, another retail-investing platform, saw membership to its app surge following Robinhood’s restrictions. The New York-based rival issued a temporary restriction on buying new stocks of GameStop, AMC and headphone manufacturer Koss, citing “extreme volatility,” but later allowed trading to resume.
Wealthsimple takes a different tack: The Toronto-based investment-management platform, popular among millennials, was another benefactor of Robinhood’s stance against the stock run. The firm, whose majority owner is Power Financial, was the highest-ranking app on the App Store in Canada on Thursday, with an influx of customers looking to use the platform’s day-trading service. “These have been record days in terms of order volume,” Wealthsimple communications director Rachael Factor told The Logic, saying the company has seen a 50 per cent increase in sign-ups on the platform and more than double the amount of trading volume than average.
“We don’t plan on halting trades,” Factor said. “It’s our role to inform clients so they can make the best decisions for themselves and provide them with the most stable, safe, reliable trading platform that we can.”
It’s not that simple: While Wealthsimple doesn’t plan to block trades, it has issued warnings on four securities caught up in the stock run. Customers considering buying and selling stock in GameStop, BlackBerry, AMC and Nokia now receive a notification warning them of the risk and volatility associated with the holdings. It’s the first time Wealthsimple has ever issued warnings on specific securities.
The company also sent an email to customers warning them of risks of emotion-fuelled trading. “People who make decisions based on emotion, like the fear of missing out on a ‘hot stock,’ tend to lose money,” the message reads. “Emotions make us make mistakes—like selling when stocks are cheap, and buying when they’re expensive.”
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New rules in the cards?: Webull CEO Anthony Denier urged the U.S. Securities and Exchange Commission to step in to establish order in the market. On Thursday, incoming U.S. Senate banking committee chair Sherrod Brown said he plans to hold a hearing on the “current state of the stock market.” His interests go beyond stemming the fervor of the past week. “People on Wall Street only care about the rules when they’re the ones getting hurt,” he said. “American workers have known for years the Wall Street system is broken—they’ve been paying the price.” In an email to The Logic, a spokesperson for the Ontario Securities Commission (OSC) said the regulator was “in close communication with [the Investment Industry Regulatory Organization of Canada] about ongoing market volatility. The OSC encourages anyone who is considering buying or selling an investment to first do research and consider getting advice from a registered individual,” said Kate Ballotta. “Investors should always check the registration of any person or business trying to sell them an investment or give them investment advice.”