The Robinhood logo is displayed on a smartphone in an organized photograph.
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The shares of GameStop, AMC and others increased in the trading period on Thursday after Robinhood said it would resume limited trading on previously restricted securities on Friday.
“Starting tomorrow, we plan to allow limited purchases of these securities. We will continue to monitor the situation and can make adjustments as needed,” said Robinhood in a statement.
GameStop’s shares rebounded after the exchange closed after Robinhood’s decision. The shares gained 28% to trade at $ 247 after the closing of the exchange, after closing with a 44% drop to $ 193.60 during regular Thursday hours.
The company said its decision to restrict trading – which has angered many users – was to meet the capital requirements required by the SEC for brokers.
“These requirements exist to protect investors and the markets and we take our responsibility to comply with them seriously, including through the measures we take today,” said the company.
Amid a frenzy of trading by retail investors, Robinhood, in addition to other retail brokers, restricted the trading of several names on Thursday. The free stock trading app said that in some cases, investors could only sell their positions and not open new ones.
In addition to GameStop, restricted trading caused AMC Entertainment and BlackBerry shares to plummet 56% and 41%, respectively, on Thursday.
Interactive Brokers has taken similar steps, and both it and Robinhood have increased margin requirements for certain securities. TD Ameritrade and Charles Schwab increased margin requirements on Wednesday.
The increase in margin requirements increases how much money an investor using leverage and derivatives must have in his brokerage account after buying shares.
The influence of retail investors – most apparent on GameStop – has captivated Street in recent days and speaks to a new class of traders who grew up in the midst of the pandemic.
Individual investors are creating restrictions by accumulating names that hedge funds are betting against, forcing funds to rush to cover their losses. This generally increases the stock even more. Retail investors are promoting their activities on the board of WallStreetBets Reddit, which has more than 3 million members. Some see it as small retail investors opposing the establishment of Wall Street.
Amid meteoric bursts – and then falls – some lawmakers are calling for an investigation. Amid a clamor of lawmakers, Democratic leaders of the House’s Financial Services Committee and Senate Banking Committee said they would hold hearings.
Here is Robinhood’s full statement:
“Last year, we saw the financial markets become a voice for those without a voice. We saw a new generation of people enter the markets, generating conversations about what it means to be an investor. Our clients have shown the world that investment is for everyone – not just for institutional investors and hedge funds.
Amid the extraordinary circumstances of the market this week, we made a difficult decision today to temporarily limit the purchase of certain securities. As a broker, we have many financial requirements, including SEC net equity obligations and clearinghouse deposits. Some of these requirements vary based on market volatility and can be substantial in the current environment. These requirements are in place to protect investors and the markets, and we take the responsibility to take them seriously, including through the measures we take today.
Starting tomorrow, we plan to allow limited purchases of these bonds. We will continue to monitor the situation and we can make the necessary adjustments.
To be clear, this was a risk management decision, and it was not made in the direction of the market makers we are targeting. We are beginning to open negotiations for some of these bonds responsibly.
We support our customers and the freedom of retail investors to shape their own financial future. Democratization of finance has been our guiding star since our early days. We will continue to build products that give more people – not less – access to our financial system. We will continue to monitor market conditions as we seek to restore full trading for these securities. We will update this Help Center article with the most recent changes.
We are deeply grateful to our customers. “
– Maggie Fitzgerald, CNBC, contributed reporting.