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February 01, 2021 at 02:31 PM
Robinhood and other brokerage platforms shifted their trading limitations on Reddit-fueled stocks Monday, as GameStop’s share price fell. At the same time, AMC Entertainment shares — as well as the price of silver and silver exchange-traded funds — rallied, amid a new wave of trading platform glitches.
Robinhood boosted its trading limit on GameStop to 20 shares Monday, up from one share, according to a CNBC report. Investors using the popular trading app also can purchase 350 shares of AMC, up from 75 shares.
The shift took place several days after Robinhood, Interactive Brokers and several other firms were hit 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.”
See: GameStop Lawsuits Hit Schwab, TD Ameritrade, Interactive Brokers
‘Growing Pains’
In a blog post Friday, Robinhood explained why it took the actions it did last week to limit trades on select stocks, saying the moves were made “not because we wanted to stop people from buying these stocks.”
Rather, “we did this because the required amount we had to deposit with the clearinghouse was so large — with individual volatile securities accounting for hundreds of millions of dollars in deposit requirements —that we had to take steps to limit buying in those volatile securities to ensure we could comfortably meet our requirements,” the brokerage firm stated.
JMP Securities analyst Devin Ryan explained the move to clients Sunday: “One concept that seemed missing from most of the internet & social media ‘hot takes’ last week was that financial services have unique and stringent regulatory and capital elements beyond most industries that provide a customer service.”
Amid the unusual stock market volatility of last week, Robinhood and other firms in the sector are “experiencing growing pains,” Ryan added.
Robinhood had “record growth during some of the most challenging days operationally this past week as Robinhood continued to lead the industry in app downloads last week by a wide margin,” he said, noting that, “on Friday it appeared that Robinhood experienced over 600,000 app downloads versus about 140,000 on its best day during the record March.”
The brokerage firm has been raising capital and recently secured $3.4 billion in additional funding, it said Monday in a blog. The funding will allow it “to continue to invest in record customer growth” and includes $1 billion announced Jan. 29.
