GameStop stock roars back after Robinhood lifts trading freeze
Robinhood shocked investors Thursday morning when it abruptly restricted purchases of GameStop, AMC Entertainment, BlackBerry and certain other volatile stocks. The equities have drawn intense interest from regular investors on the Reddit forum r/WallStreetBets and other online trading communities, driving share prices to astronomical heights and alarming regulators and brokerage firms
Other trading platforms, including Interactive Brokers and E-Trade, similarly blocked their customers from buying GameStop and the other “meme stocks” on Thursday. But Robinhood, owing to its popularity, its namesake and its branding as a democratizing force in the world of high finance, drew the ire of customers and public officials for shutting its customers out in the middle of the trading frenzy.
In a blog post Thursday afternoon, Robinhood said its decision to limit buying was necessary to conform with financial regulations, “including SEC net capital obligations and clearinghouse deposits,” which can heighten in times of substantial volatility. “These requirements exist to protect investors and the markets and we take our responsibilities to comply with them seriously, including through the measures we have taken today,” the company said.
But Robinhood’s explanation for the restrictions did little to appease critics. In a live stream on Twitch Thursday night, Rep. Alexandria Ocasio-Cortez (D-N.Y.) questioned Robinhood’s move amid a wide-ranging discussion about the power dynamics between Wall Street and the public.
“We didn’t see anyone go to jail for that,” Ocasio-Cortez said of Wall Street during the mortgage crisis. “We didn’t see virtually anybody held accountable in any serious way.” The appearance of a populist revolt with GameStop felt like the first time anyone was held to account, she said.
Leaders from both parties in the House and Senate who lead committees that oversee the financial services industry have vowed to hold hearings on the volatile trading. Among the lines of questioning will be the financial role of free trading platforms like Robinhood and the actions of hedge funds whose short selling is at the center of the market volatility.
In a statement Friday, the leaders of the Securities and Exchange Commission said the agency “will closely review actions taken by regulated entities that may disadvantage investors or otherwise unduly inhibit their ability to trade certain securities.” The SEC went on to say that “we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws.”
