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Schwab, TD Ameritrade Put Brakes on Some GameStop Trading

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Amid a rush of trading in GameStop fueled by members of the Reddit group WallStreetBets, Charles Schwab and TD Ameritrade have put some limits on clients’ trading of the game retailer’s shares.

“The bottom line is that clients are still able to trade in GME, but we’ve put some restrictions on certain types of transactions in the interest of helping mitigate risk for our clients,” Schwab said Wednesday in a statement.

For instance, the brokerage firm isn’t letting clients sell naked call options “in order to mitigate an unlimited risk situation.” (Naked call options are sold uncovered, meaning without any offsetting positions.)

“These decisions are based on risk and volatility and are made on an individual basis,” Schwab said in a statement.

The volume of GameStop shares surged to over 177 million on Monday and Tuesday, dropping to a still-high 91 million on Wednesday and 42 million on Thursday.

Meanwhile, its stock rose more than 620% from late Friday, when it traded at about $65 per share, to $469 per share in intraday trading Thursday; however, the shares were down nearly 30% for the day on Thursday afternoon, trading at $250.

On Jan. 13, Schwab changed GameStop shares status to “non-marginable” from “marginable.”  Since then, clients couldn’t use GME as collateral for margin loans used to buy other holdings; earlier, they could do so “in a limited way.”

Schwab says it’s also put restrictions in place “on certain transactions in GME and other securities.” This includes, for instance, raising margin requirements on GME stock and options positions. This means clients must hold more equity in their accounts to make these trades when using margin.

TD Ameritrade’s Stance

TD Ameritrade says it “has not halted trading in any securities. We have placed restrictions on some transactions in $GME and other securities.”

While these restrictions “differ from security to security and are subject to change,” they include steps such as “increasing margin requirements or limiting certain types of transactions, like short sales and those that may involve unlimited risk.”

The brokerage firm, which was bought by Schwab on Oct. 6 for $22 billion, added in a statement: “We have been adjusting our requirements for several days as we continued to see trends indicating unusual volume in an unprecedented market environment, which appear to be divorced from traditional market fundamentals.”

Meanwhile, Wells Fargo has stopped its advisors from making recommendations to clients to buy GameStop or AMC Entertainment.

“As of today, Wells Fargo Advisors is not allowing solicitation of those two securities,” a spokesperson for the bank told CNN on Wednesday. Advisors can still handle trades in these stocks for their clients.

— Check out Huge GameStop Position Lurking in Some ETFs on ThinkAdvisor.