GameStop (GME): Robinhood fueled the fire

Wall Street is concerned that stocks like GameStop (GME), Nokia (NOK), AMC Entertainment (AMC) is to hot to handle. Extreme volatility caused trading halts for several popular stocks on Thursday morning. According to data from Nasdaq, all three stocks triggered code M, a volatility trading pause for an “exchange-listed issue.” Trading resumed a few minutes later.

With short-squeeze mania running rampant on the stock market, these stocks are trading with extremely high volume. As of 10:40 a.m. EST, GameStop’s trading volume was already over 20 million shares, according to Yahoo Finance. This volume has caused all three of these stocks to more than double during January alone, with GameStop stock surging over 1,500%.

The mayhem is concerning to many on Wall Street, and brokerages are starting to take action to turn down the temperature. According to a blog post today from the company, Robinhood is restricting actions for GameStop, AMC, Express, and more. Users will only be allowed to close their positions for now, and the popular brokerage is also raising its margin requirements. Robinhood isn’t alone. Interactive Brokers made a similar move.

The retail investing crowd trading GameStop stock isn’t taking this new development lying down. Robinhood users are inundating app stores with one-star reviews. 

The World is Watching

The unprecedented volume of trading was prompted by a new class of retail investors and day traders that have flooded the market since the beginning of the pandemic. Many of them were part of a buying boom last year as they chased struggling stocks they believed deserve a second chance. Online forums like Reddit’s WallStreetBets have become a place for these new day traders to discuss the stocks.

The Biden administration, including Treasury Secretary Janet Yellen, is “monitoring the situation,” as are the SEC and FINRA. Market regulators typically do not favor day-trading manipulation of the stock market, and regulations are likely to follow.

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Jay Lorrence
Investor of 12 years and Managing Editor of Money Midnight, a news outlet focused on highly profitable investment ideas and bold underground research.
Articles: 231

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