Some major brokerage houses have begun to respond to a frantic rise in the share price of companies, which has been attributed to the furious purchase by individual investors on social platforms.
On Wednesday, TD Ameritrade said it is restricting trading for GameStop
GME,
and AMC Entertainment Holdings
I HAVE C,
as well as other names, amid a three-digit percentage increase in the price of those companies in recent days.
“In the interest of reducing risk for our company and customers, we have imposed several restrictions on transactions in USD GME, AMC $ and other securities,” a spokeswoman for TD Ameritrade told MarketWatch, referring to company symbols.
“We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors,” she said.
Charles Schwab, who bought TD Ameritrade but still operates as an independent retail brokerage platform, said it has tightened margin requirements for some of these trade names, including GameStop.
A Schwab spokeswoman said the platform changed its margin requirements or how much an investor could borrow on January 13 and said it had put “restrictions on certain transactions in GME and other securities”.
Restrictive moves are taking place as GameStock game retailer shares rose 1,600% in January as traders gathered in online chat forums to make big bets on stocks using options, often cash-out calls. pay only if the stock increases in value over a set period.
Traders on sites like Reddit’s WallStreetBets and trading platforms like Robinhood have faced hedge fund investors, sparking a battle between prominent Wall Street sellers and individual investors in GameStop shares.
A Robinhood spokeswoman said officials on the popular trading platform “continuously monitor markets and adapt as we feel needed for the benefit of our customers.”
Robinhood said it has also moved the increased requirements for GME and AMC to 100%, stressing that Robinhood does not allow for lack of shares or allow customers to trade empty options.
However, the recent launch of GameStop has spread to other areas of the market, with shares of companies such as AMC Entertainment also rising on Wednesday, along with shares of Bed Bath & Beyond BBBY,
and retailer Express Inc. EXPR,
whose shares increased by 250%.
Read: It’s not just GameStop: Here are some of the other short-circuited actions that disappear above
The recent volatile trade has even made some on Wall Street uneasy, worried about a bubble. Dow Jones Industrial Average DJIA,
the S&P 500 SPX index,
and Nasdaq Composite Index COMP,
all traded lower on Wednesday.
Regulators have taken note of the recent action, with William Galvin, the Commonwealth Secretary of Massachusetts, saying in an exclusive statement to Barron on Tuesday that he is watching the action unfold.
“This is definitely on my radar,” Galvin said. “I’m worried because it suggests there’s something systemically wrong with trading options on this stock.”