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Schwab's CEO Clarifies Its Response to Reddit-Inspired Rally

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CEO Walt Bettinger of Schwab CEO Walt Bettinger speaks at the firm’s 2018 Impact conference. (Credit: Charles Schwab)

As controversy continued around the actions taken recently by certain brokerage firms amid the Reddit-fueled volatility seen in the trading of GameStop and other stocks, Charles Schwab CEO Walt Bettinger took another stab Tuesday at setting the record straight about the firm’s actions.

“Unlike some other brokerage firms, neither” Schwab nor TD Ameritrade’s trading platforms halted any stock purchases or sales last week, Bettinger stressed during the company’s Winter Business Update webcast.

In addition, neither Schwab or TD “restricted clients from executing any basic options strategies,” he said, adding that he was attempting to dispel claims to the contrary that had been made by certain publications and on social media.

What Schwab and TD Ameritrade did do was “restrict certain advanced options strategies,” Bettinger said Tuesday. He went on to explain the reasons in a bit more detail than the firm did on Friday.

“Some of those advanced options strategies create the risk of loss levels that would be so large that the investor/client may not be able to cover the losses that they incurred from their actions,” the executive said. “Effectively, that leaves the risk of those losses with us.”

Further playing down the significance of the moves Schwab took, he explained: “Actions like this are normal course of business. We take them on a regular basis. And, as you would expect, our owners, our regulators and others expect — and they actually require — that we manage the firm prudently.”

Bettinger continued: “It is imprudent to allow positions that have the potential to leave our brokerage firm with the losses that the investor/client may not be able to cover.”

The CEO didn’t mention any rival brokerage by name.

Related: Schwab, TD Ameritrade Put Brakes on Some GameStop Trading

Robinhood’s Approach

Robinhood has publicly stated that it placed limitations on how many shares could be traded on certain stocks including GameStop and AMC Entertainment last week.

On Monday, Robinhood boosted its trading limit on GameStop to 20 shares Monday, up from one share. Investors using the popular trading app could also purchase 350 shares of AMC, up from just 75 shares as part of limitations set on that stock by Robinhood.

On Tuesday, the trading limit on GameStop shares was increased to 100 from 20, while the limit on AMC shares was increased to 1,250, according to an update on Robinhood’s website.

In his discussion, Bettinger echoed some points the firm made in a statement released on Friday.

These comments were issued one day after Schwab, TD Ameritrade, Interactive Brokers and Robinhood 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