Investors behind rise in GameStop shares hit by trading curb

by Jonathan Adams

But the shares resumed their advances after brokers said they planned to lift the restrictions

An army of retail investors that has routed Wall Street’s professionals in recent days was dealt a blow on Thursday, after online brokerages restricted trading in GameStop and other stocks that had soared this week.

But the shares rebounded in after hours trading, resuming their advances after Robinhood Markets Inc and Interactive Brokers said they planned to lift the restrictions on Friday.

Retail investors, celebrities and policymakers had denounced Thursday’s restrictions and participants in online forums seethed, accusing the trading platforms of seeking to protect Wall Street’s interests at the expense of smaller investors.

Robin Hood: a parable about stealing from the rich to give to the poor. Robinhood: an app about protecting the rich from being short squeezed by the poor, Jake Chervinsky, a lawyer for fintech company Compound, wrote on Twitter.

Robinhood reversed course by the end of the day and said limited trading in the stocks would resume on Friday. Shares of retail favourites including GameStop and AMC Entertainment, which erased an early surge on news of the restrictions then rose after hours.

In order to protect the firm and protect our customers we had to limit buying in these stocks, Robinhood chief executive Vlad Tenev said in an interview with CNBC. We absolutely did not do this at the direction of any market-maker or any hedge fund or anyone we route to or other market participants.

The restrictions, and their partial reversal, marked a turn in a battle that many have framed as a showdown between hedge funds and other institutions against retail investors.

Until Thursday, it appeared retail traders had the upper hand. Coordinating on forums such as Reddit’s Wallstreetbets, the small investors forced hedge funds to unwind short positions that had bet on the decline of shares in companies such as GameStop and American Airlines. That activity resulted in a short squeeze that sent the shares soaring.

This article is for information purposes only.
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