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SEC To Review Brokers' Restrictions on GameStop, AMC Trading (wsj.com) 57

Securities regulators said Friday they plan to closely review the actions of some brokerage firms [Editor's note: the link may be paywalled; alternative source] that restricted investors' ability to trade volatile stocks such as GameStop this week. From a report: The Securities and Exchange Commission's statement on Friday is the clearest indication yet that regulators are examining potential misconduct around the trading mania that swamped stocks such as GameStop, AMC Entertainment and Novavax. Robinhood Markets restricted investors' ability to purchase shares in GameStop and 12 other companies on Thursday as it dealt with the impact on its financial requirements of a surge in trading. Robinhood raised $1 billion to shore up its ability to clear and execute trades in those popular and volatile stocks, which the broker on Friday allowed clients to resume trading. Regulators also said they are on the lookout for potentially manipulative trading. This week's sharp price swings have been aided by bullish individual traders communicating on websites such as Reddit's WallStreetBets about which shares to buy. Traders drove up demand for stocks that other investors such as hedge funds had bet against, resulting in a "short squeeze" that ramped up the prices of GameStop more than 10-fold.
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SEC To Review Brokers' Restrictions on GameStop, AMC Trading

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  • ...or perhaps take 6 months and spend hundreds of thousands to wring their hands.
  • On TD Ameritrade, I found there was a ceiling of around $1k you could set on a limit sale - so you couldn't set some fairly high limit even if you wanted to, it simply wouldn't allow it.

    I know it's there to prevent people from making mistakes, but it also limits the small investor in ways that a large investor would not be.

  • From what I've read, they stopped the trading on this stock for "valid" reasons, meaning the way the stocks are covered would have screwed them over had they kept allowing the trades as-is. But the Interwebz, never being a thing to let a fake narrative spread, has declared Evil Robin Hood in Cahoots with Evil Hedge Funds.

    If anything comes out of this, about the only thing should be "true" instant trading so your stock broker isn't exposed when weird shit like this happens. You want to buy the stock, fine -

    • Re:What a mess. (Score:5, Informative)

      by evilquaker ( 35963 ) on Friday January 29, 2021 @04:21PM (#61006938)
      Indeed: here's a good summary: https://www.bloomberg.com/news... [bloomberg.com] There is no reason in 2021 that we should have T+2 settlement. Hopefully this will spur innovation to finally solve this problem.
      • Re:What a mess. (Score:5, Interesting)

        by Beeftopia ( 1846720 ) on Friday January 29, 2021 @04:53PM (#61007022)

        Realize that Bloomberg is not a neutral party. I was listening to Bloomberg radio this morning (the "Bloomberg Surveillance" program, usually quite informative) and they asked a simple question of a field reporter about the relationship between Citadel, Point72 and RobinHood and the reporter absolutely sidestepped the question like a running back juking a defender.

        This is just about a guy discovering a company had naked shorts against it, and discovered deep pocketed hedge funds were shorting it too, and would have to pony up some cash if the stock went the other way.

        However... there's the other angle - how many strings the hedge fund owners have access to, which is doubly fascinating, and informative. "How did that guy get trading shut down on all these platforms? Why are all these financial news companies railing against the Reddit mob? What is the link between these guys and the government [foxnews.com] and the federal reserve [citadel.com]?"

        I remember back in March 2000, when Nasdaq reached its peak. Just before that, a teenager brought down Yahoo. You could almost hear the gears turning: "Are these companies really worth billions if one teenager can disable one of the titans?" I think there might be a bit of a dawning realization going on now too.

      • by aitikin ( 909209 )
        Thank you, that was an informative read.
      • Innovation is not the issue. There's nothing technical that prevents a much shorter time to resolve the trades. The time is there because it makes people money.

        The middlemen get to quasi-short the transaction, if they want to. They also get to use the money until the trade settles.

        After all, we're in a world with high-speed trading systems where brokers were competing to be physically closest to the exchange's computers in order to inject themselves into transactions in milliseconds. Settling a retail t

    • Re:What a mess. (Score:5, Insightful)

      by drkshadow ( 6277460 ) on Friday January 29, 2021 @04:25PM (#61006950)

      The stock did not stop trading. The stock traded up and down all day on Thursday. What was stopped from trading were the individual investors -- they had an option "sell" and not an option "buy." The ones that this benefit were the holders of short-positions, who needed to close their position or face even larger losses.

      *The Stock Did Not Stop Trading*

      *The Brokerages (RobinHood) Did Not Stop Trading*

      The brokerages only stopped small-time traders from buying, which would have made the price go up. They knowingly caused the market to be flooded with SELL orders (the only order that could be placed), knowingly and effectively collapsing the price of the stock, against the open market's valuation (for whatever reason it was valued as it was). Meanwhile, the market was fully open to large traders who placed bad bets who would be most hurt by the stock's increase in value.

      • Re:What a mess. (Score:4, Informative)

        by Afell001 ( 961697 ) on Friday January 29, 2021 @05:11PM (#61007058)
        This is the issue. By stopping individual investors in specific brokerages from being able to buy (and only sell), the short sellers are able to mitigate their losses by pushing the stock price down. They would have driven it to the floor if they could, so they could make somewhat of a profit. Who knows what kind of pressure the short sellers were bringing to bear on the brokerages. It's something the SEC will look into and then sweep under the rug. If they do anything, I will be very surprised, and even then, I would expect that those who brought pressure on the brokerages would merely get a slap on the wrist because...money and power.
      • The brokerages only stopped small-time traders from buying, which would have made the price go up. They knowingly caused the market to be flooded with SELL orders (the only order that could be placed), knowingly and effectively collapsing the price of the stock, against the open market's valuation (for whatever reason it was valued as it was). Meanwhile, the market was fully open to large traders who placed bad bets who would be most hurt by the stock's increase in value.

        This.

        A massively uneven playing field was intentionally created, with the result of manipulating the affected stocks downward.

        And now, under the veil of 'lifting' restrictions, they're actually extending them by limiting ~50 stocks to something between 1 and 10 units.

    • by godrik ( 1287354 )

      From what I've read, they stopped the trading on this stock for "valid" reasons, meaning the way the stocks are covered would have screwed them over had they kept allowing the trades as-is. But the Interwebz, never being a thing to let a fake narrative spread, has declared Evil Robin Hood in Cahoots with Evil Hedge Funds.

      Well, I do feel like it is probably a case of the two things being true at the same time. I believe Robinhood had valid reasons to stop the trade AND it is very likely they wanted to stop the trade for external reasons.

    • There may very well be an evil hedge fund on the hood side also. Due to the large number of trades I suspect as much.
  • Normally, they take at least a few weeks to even notice a huge event and months to say anything about it.

    The whole affair has created such turmoil across the markets they got involved SUPER fast. For them, anyway.

    So what next? I'm guessing they will hammer a few key players on Reddit and in some brokerages and at Robinhood as well depending on what was really happening at RH behind the scenes and not the PR bullshit they've put out. We really don't know for sure what was going on behind closed doors but

  • HFTs (Score:5, Insightful)

    by Random361 ( 6742804 ) on Friday January 29, 2021 @04:53PM (#61007020)
    Now they need to do something about HFTs.
  • by schwit1 ( 797399 ) on Friday January 29, 2021 @05:28PM (#61007150)

    One of the most revealing 40-second video clips you'll ever watch: [twitter.com]

    Former SEC Commissioner Laura Unger compares short squeeze to January 6th at the Capitol.

    THEY GET VERY UPSET WHEN THE PLEBS DON’T KNOW THEIR PLACE:

  • We live in era where companies invent connections that take fewer milliseconds than competition, yet brokerage takes 2 days to close you purchase.
  • Lots will be said, but doubtful anything will change. Investment banks only exist to make money and do not really mind how they do it. When smaller investors get in the way of that ethos, do not be surprised if quiet (yet legal) manipulation takes place or adjustment of rules to allow for it. Most of us like a good movie, so quietly happy that this is helped AMCs debt situation. The actions taken by minnows in a shoal has shown up the casino that this market sector really is now. Complaints about th
  • maybe Securities regulators need to stop short sellers who undercut companies, seems unethical !

Stellar rays prove fibbing never pays. Embezzlement is another matter.

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