The Robinhood logo is shown on a smartphone in a photograph arranged.
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Shares of GameStop, AMC and others jumped into extended trading on Thursday after Robinhood said it would resume limited trading of previously restricted titles on Friday.
“As of tomorrow, we plan to allow limited purchases of these securities. We will continue to monitor the situation and make the necessary adjustments,” Robinhood said in a statement.
GameStop shares recovered after trading following Robinhood’s decision. Shares gained 28% to trade at US $ 247 after closing hours, after closing 44% at $ 193.60 during normal Thursday hours.
The company said its decision to restrict trade – which angered many users – was to meet the capital requirements required by the SEC for broker-dealers.
“These requirements exist to protect investors and markets and we take our responsibilities to take them seriously, including the steps we have taken today,” the company said.
Amid a frenzy of commercial activity by retail investors, Robinhood, among other retail brokers, restricted trading on several names Thursday. The stock trading app said that in some cases, investors could only sell their positions and not open new ones.
In addition to GameStop, restricted trading on Thursday sent shares of AMC Entertainment and BlackBerry down 56% and 41%, respectively.
Interactive Brokers took similar steps, and both he and Robinhood increased the margin requirements of certain securities. TD Ameritrade and Charles Schwab raised margin requirements Wednesday.
Increasing margin requirements increases the amount of money an investor who uses leverage and derivatives should have in their brokerage account after buying a stock.
The influence of retail investors, most evident on GameStop, has captivated the street in recent days and speaks to a new class of traders who grew up in the midst of the pandemic.
Individual investors create short pressures by accumulating names against which hedge funds bet, forcing funds to run to cover their losses. Usually, this further increases the shares. Retail investors promote their business on WallStreetBets ’RedSit board, which has more than 3 million members. Some see it as small retail investors backing down against the Wall Street establishment.
Amid the weather (and then falls), some lawmakers are calling for an investigation. Amid a cry from lawmakers, Democratic leaders on the House Financial Services Committee and the Senate Banking Committee said they would hold hearings.
Here is the full Robinhood statement:
“Over the last year, we’ve seen financial markets become a voice for the voiceless. We’ve seen a new generation of people enter the markets, provoking conversations about what it means to be an investor. Our clients have shown the world that investing is for everyone, not just institutional investors and hedge funds.
Amid this week’s extraordinary circumstances in the market, today we made a tough decision to temporarily limit the purchase of certain stocks. As a brokerage firm, we have many financial requirements, including SEC net equity obligations and clearing house deposits. Some of these requirements fluctuate depending on market volatility and can be substantial in the current environment. These requirements exist to protect investors and markets and we take our responsibilities to meet them seriously, even through the measures we have taken today.
Starting tomorrow, we plan to allow limited purchase of these securities. We will continue to monitor the situation and make the necessary adjustments.
To be clear, this was a risk management decision and was not made based on the direction of the market leaders we are targeting. We are beginning to open the trading of some of these stocks responsibly.
We stand up for our customers and the freedom of retail investors to set up their own financial future. Democratizing finances has been our guiding star since our earliest days. We will continue to build products that give more people (not less) access to our financial system. We will continue to monitor market conditions as we attempt to restore full trading of these securities. We’ll update this Help Center article with the latest changes.
We are deeply grateful to our customers. “
– CNG’s Maggie Fitzgerald contributed to the notification.