Large brokerages including Charles Schwab, Interactive Brokers and TD Ameritrade are facing lawsuits after placing some trading restrictions on certain types of transactions involving GameStop and other stocks amid extreme volatility.
Robinhood, Schwab, Interactive Brokers Group and TD Ameritrade were hit Thursday with a class-action lawsuit in Colorado for what the suit alleges is “purposefully, willfully, and knowingly removed numerous stocks … from their trading platforms in the midst of an unprecedented stock rise thereby deprived retail investors of the ability to invest in the open-market, thereby manipulating the open-market.”
The lawsuit also states that actions taken by these brokerage firms created “massive losses” for retail investors.
However, Charles Schwab insists that neither it nor TD Ameritrade “halted buying or selling ANY stocks this week,” according to a statement released on Friday. “Neither firm restricted buying or selling basic options.”
Both firms did, though, “adjust margin requirements on select stocks to ensure clients had sufficient assets to pay for stock purchases … and also restricted certain advanced options strategies,” Schwab explained.
Another lawsuit, filed Thursday in California Central District Court against Robinhood, TD Ameritrade and Schwab, contends that the brokerages “conspired to impose a coordinated restraint on stock trading that resulted in injuries to Robinhood and TD Ameritrade customers.”
A third suit, filed in the District Court for the Northern District of Illinois against Robinhood, Schwab, TD Ameritrade and Melvin Capital Management, a hedge fund that was aggressively shorting the stocks, also contends that the firms “conspired to impose a coordinated restraint on stock trading that resulted in injuries to Robinhood and TD Ameritrade customers.”
The suit brought in Colorado District Court was on behalf of Chance Daniels. It states that the brokerages halted trading on their platforms “in the midst of an unprecedented stock rise thereby deprived retail investors of the ability to invest in the open-market, thereby manipulating the open-market.”
In so doing, the brokerages “created a one-way buy-sell situation by which the only option of retail investors who had already purchased the above securities, and others, to sell/liquidate their holdings, thus depriving these stocks of buy liquidity to counter selling pressure by permitting purchase of the equity to take place.”