These Are The Shadowy New York Financial Institutions That Forced Robinhood To Restrict Trading In

Discussion in 'Wall St. News' started by Banjo, Feb 1, 2021.

  1. Butterfly

    Butterfly

    trading MicroCaps is usually restricted by brokers if you are a newbie. How did they get around that?

    I understand that the MA regulator is currently investigating RH for "gamifying" the whole investing experience
     
    #21     Feb 2, 2021
  2. JSOP

    JSOP

    Well if there is no artificial restrictions in place, people will keep buying and prices of $400, $700, even $1000 are achievable. People tend to think that prices are somehow created out of thin air by some market fairy waving a magic wand. No those prices are what was reached that keeps demand satisfied with supply and vice versa, any unsatisfaction from either side and you will see the price change until demand is satisfied with supply. Now with demand for the shares artificially suppressed to meet the supply then of course the price will not go up.

    They accuse WSB of "market manipulation". The biggest market manipulators are these clearinghouses, MM's and liquidity providers by again changing all the rules to make sure they win. If I have the means, why am I only allowed to buy one share of a stock that I want to buy??!! This does not make sense. This is undue market interference.
     
    #22     Feb 2, 2021
    murray t turtle and VicBee like this.
  3. Butterfly

    Butterfly

    hardly, they are in the business of risk management and liquidity restrictions for counter party that poses a risk. What they did is what they are expected to do to avoid a repeat of previous market disasters.
     
    #23     Feb 2, 2021
  4. Butterfly

    Butterfly

    The SEC is the police of the markets, CCP and clearninghouses are the firefighters :)

    RH is on fire, and you don't let the fire spread wild before you think you need to stop it :)
     
    #24     Feb 2, 2021
    murray t turtle likes this.
  5. maxinger

    maxinger

    market makers provide liquidity.

    Manipulators ( legit, illegal, fake, or whatever) provide liquidity and also
    trading opportunities.
    so seize the trading opportunity.
     
    #25     Feb 2, 2021
  6. themickey

    themickey

    And now in Australia.....
    https://www.smh.com.au/business/mar...suspend-gamestop-trading-20210202-p56yqz.html
    • Local broker Stake forced to suspend GameStop trading
    Colin Kruger Updated February 2, 2021 — 5.57pm

    Australian low-cost trading platform Stake has blocked customers from buying high-flying US stocks including GameStop and Nokia due to restrictions imposed by its US broker DriveWealth.

    Stake said DriveWealth’s move, which upset customers, was made after the capital requirements for trading in GameStop, Nokia and AMC Entertainment was increased significantly and made the funding required prohibitive.

    “Any buy orders on any of these symbols made after Monday’s close will automatically be cancelled prior to market open Tuesday,” Stake said.

    [​IMG]
    GameStop has been at the centre of a trading frenzy as a chatroom-inspired army of retail investors took on hedge funds which were shorting the stock. Credit:Bloomberg

    Stake, which allows local retail investors to buy US stocks, has been caught up in the trading frenzy surrounding GameStop and other stocks.

    GameStop shares surged more than 1500 per cent last week as an army of retail day traders on Reddit forum WallStreetBets rushed to buy shares in order to create a “short squeeze” against major US hedge funds that had bet against the struggling company’s share price.

    “To be clear, this is not a decision Stake has made. As DriveWealth is our broker-dealer, we can only reflect the securities they make available. As such, we are unable to confirm when this may change,” it said in a statement on Tuesday evening.

    Trading platform Robinhood came under fire last week after it also stopped its users from buying more GameStop shares and Stake copped flack from users on Twitter after the announcement.

    “Regardless of what your broker-dealer stipulates, or whether it is due to increased capital requirements, the fact that you are halting trading on those securities right now, places your platform in the same rubbish bin as Robinhood. Appalling,” tweeted one user.

    Brokers are required to provide cash or capital guarantees to ensure funds are available through the settlement process. It is usually about 10 to 15 per cent of a trade’s value but can vary significantly based on stock volatility.

    In the case of GameStop, AMC and Nokia the required capital guarantee was increased by 250 per cent from previous levels.

    “DriveWealth have decided not to take on the large capital risk that comes with this significant increase. We’ll update you if this changes,” Stake said.

    The shock news came after its share trading platform survived a major test on Monday evening as it dealt with an unprecedented volume of transactions that has seen more than $1 billion worth of US stocks traded on its platform in just over a month.

    Stake said its platform was “healthy” despite more than 54,000 trades being executed through its platform which suffered service problems last week amid the global trading frenzy around stocks like GameStop.

    “There were some isolated latency issues to downstream partners feeling some strain from the record-breaking volumes we’re seeing in the markets,” said chief executive Matt Leibowitz of Monday’s trading performance.

    He said Stake worked through the weekend to try and fix performance issues and deal with the incredible surge in trading activity that saw $US813 million ($1 billion) worth of stocks traded through the platform in the first weeks of the new year.

    More than 185,000 trades were executed through the platform in the last week alone, according to Stake.

    Meanwhile, the corporate regulator will not bring forward a ban on high leverage products that are fuelling price spikes in some stocks and commodities despite individual brokers moving to limit some types of investment products due to the retail shareholder frenzy.

    The Australian Securities and Investments Commission confirmed to The Age and The Sydney Morning Herald it was not intending to bring forward the restrictions on the leverage allowable for contracts for difference. The restrictions are set to begin on March 29.

    Popular online trading platforms IG Markets and other brokers have moved to limit some trades following the immense volatility in recent days.

    Stake is one of many brokers that have struggled under the unprecedented volume of transactions from customers. Major US brokers such as Charles Schwab, Vanguard Group and Fidelity Investments also reported service disruptions.

    The incredible volatility has provided an opportunity for other Australian investors. Forager Funds more than doubled its money on US retailer Bed, Bath & Beyond in just 10 days as hedge funds caught by the GameStop “short squeeze” were forced to close their short positions on the struggling company.

    In a blogpost on Tuesday, Forager’s Gareth Brown emphasised that “this is a very, very unusual market and probably won’t last very long”.

    He said other Forager positions have also worked out “blisteringly quickly”. “This is a strange market. We feel more comfortable when an investment thesis takes a year or two to play out,” he said.

    Not everyone has caught the gravy train.

    David Paradice’s funds management firm Paradice Investment Management missed out on a potential $1 billion windfall after selling shares in GameStop just before a day trader revolt led to an incredible surge in the stock.

    “It’s been crazy to watch, it’s also been very interesting,” Mr Paradice told The Age and The Sydney Morning Herald. “It really is madness.”

    with Sarah Danckert
     
    #26     Feb 2, 2021
  7. themickey

    themickey

    Ya, madness because you weren't onboard and missed out, lmao.
     
    Last edited: Feb 2, 2021
    #27     Feb 2, 2021
  8. JSOP

    JSOP

    You cannot manage your risk by forcing other people not to do something. The option that I sold just went ITM, I don't have the money for the assignment or buy the option back. Can I just force people not to exercise their options so I can manage the "counterparty risk" on my side? If I can't do that then neither should they.
     
    #28     Feb 2, 2021
  9. Butterfly

    Butterfly

    never underestimate FOMO by the usual idiot :p
     
    #29     Feb 2, 2021
  10. Butterfly

    Butterfly

    I think you are missing the point for the role of CCP and clearing houses. Your broker is your "guarantor" on a "retail" level, while CCPs are their "guarantor" on the "wholesale" level. They need to take actions. Think of it as a margin call for a brokerage house to mitigate risks, hence why RH had to put up some cash.
     
    #30     Feb 2, 2021
    eastern_warrior likes this.