Robinhood, Other Brokerages Update Trading Limits as Platform Glitches Continue
TD Ameritrade still had some trading restrictions in place Monday, including on AMC and GameStop stock, according to its website.
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.
Schwab, TD Ameritrade
Schwab and TD Ameritrade, which Schwab now owns, put some limits on certain types of transactions involving GameStop’s shares amid last week’s heavy volatility, but stressed Friday in a press release that neither of them “halted buying or selling ANY stocks” during the trading week of Jan. 25-29.
Schwab only “put some restrictions on certain types of transactions in the interest of helping mitigate risk for our clients,” it said Wednesday in a statement. For instance, the brokerage firm wasn’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.
TD Ameritrade still had some trading restrictions in place Monday, including on AMC and GameStop stock, according to its website. They are:
- Stocks — 100% holding requirement (not marginable);
- Long calls and puts are allowed;
- Covered call and short put orders may only be placed with a broker; “please be aware that wait times to speak with a broker may be longer than normal due to current market conditions;”
- Covered calls only allowed if an account currently has the shares;
- Short puts only if investors have the maintenance/cash to cover the entire exercise amount of the short puts;
- All other complex options orders will not be accepted.
Schwab did not immediately respond to a request for an update on its limitations.
Related: Schwab, TD Ameritrade Put Brakes on Some GameStop Trading Platform Glitches
Reports of several trading platforms having glitches started Monday morning at 9:25 a.m. ET, with Robinhood, amid the increased volatility on some stocks and on silver, according to the Downdetector website. E-Trade, Fidelity, TD Ameritrade, Ally and Schwab all followed by 9:40 a.m. ET.
Complaints from investors claiming to be clients of the platforms ran the gamut, ranging from an inability to trade at all on Ally, incorrect data being provided by Schwab, an inability to update stop orders on TD Ameritrade, an inability to log into Fidelity’s platform, and slowness on E-Trade.
“As we continue to experience high levels of trading and customer interactions, we’re aware that some customers may have experienced intermittent issues for a few minutes at market open,” a Fidelity spokeswoman said Monday. “We took quick action to address the issue.”
The vast majority of Twitter complaints about Robinhood Monday were related to clients being unable to trade the stocks they wanted to in the amounts they wanted to.
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