Extreme volatility in stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. “Generated a substantial risk” for brokerages, imposing stricter requirements on companies, according to DTCC, the Wall Street clearing house.
“As volatility increases, so does the margin requirements of the portfolio,” the Depositary Trust & Clearing Corp. said on Thursday.
This week’s wild transaction was led by traders on a Reddit forum, who joined forces to increase the shares of several short-term stocks, causing billions of dollars in losses for hedge funds.
Companies included Robinhood Markets, Morgan Stanley’s E * Trade and Interactive Brokers Group Inc. were among those who restricted trading in some of the names powered by Reddit.
In a blog post, Robinhood associated its decision to impose trading restrictions with increased requirements from the clearing center.
“These requirements exist to protect investors and markets and we take our responsibilities to take them seriously, including through the measures we have taken today,” Robinhood said.