Some of the major brokerage firms have begun to respond to a frantic increase in the stock price of companies, which was attributed to the unbridled purchase by individual investors on social media platforms.
On Wednesday, TD Ameritrade said it was restricting trade in GameStop
GME,
and AMC Entertainment Holdings
AMC,
as well as other names, amid a three-digit percentage increase in the price of these companies in recent days.
“In the interest of mitigating risk for our company and customers, we have placed several restrictions on some transactions in $ GME, $ AMC and other securities,” a TD Ameritrade spokeswoman told MarketWatch, referring to the company symbols.
“We made these decisions very cautiously amid market conditions and other unprecedented factors,” she said.
Charles Schwab, who bought TD Ameritrade, but still operates as an independent retail brokerage platform, said he tightened the margin requirements on some of these trade names, including GameStop.
A Schwab spokeswoman said the platform changed its margin requirements, or how much an investor can borrow, on Jan. 13 and said it had “placed restrictions in place on certain transactions in GME and other securities”.
Restrictive moves take place at the time the stock of video game retailer GameStock rose 1,600% in January, with traders flocking to online chat forums to place big bets on stocks using options, often called out of the money they pay only if the stock rises in value during a given period.
Traders on sites like Reddit’s WallStreetBets, and using trading platforms like Robinhood, clashed with hedge fund investors, triggering a battle between prominent Wall Street short sellers and individual investors in GameStop shares.
A spokeswoman for Robinhood said that employees at the popular trading platform “continuously monitor the markets and adjust as we think necessary for the benefit of our customers”.
Robinhood said he also changed the increased requirements for GME and AMC to 100%, emphasizing that Robinhood does not allow the sale of shares or allows clients to trade short options.
However, the recent GameStop race has spread to other areas of the market, with shares from companies like AMC Entertainment also rising in price on Wednesday, along with shares in Bed Bath & Beyond BBBY,
and retailer Express Inc. EXPR,
whose shares rose 250%.
Read: It’s not just GameStop: here are some of the other heavily sold stocks
The recent volatile trade has even made some on Wall Street uneasy with the concern of a bubble. The DJIA of the Dow Jones Industrial Average,
the S&P 500 SPX index,
and the Nasdaq Composite Index COMP,
they were all traded lower on Wednesday.
Regulators are aware of the recent action, with William Galvin, the Massachusetts Community Secretary, telling Barron’s in an exclusive statement on Tuesday that he was watching the action unfold.
“This is certainly on my radar,” said Galvin. “I am concerned, because it suggests that there is something systematically wrong with trading options on this stock.”