Some major brokerage firms have begun to respond to a frantic surge in company stock prices attributed to rabid purchases by individual investors on social media platforms.
On Wednesday, TD Ameritrade said it was trading for GameStop
GME,
and AMC Entertainment Holdings
AMC,
as well as other names, amid a three-digit rise in the price of those companies in recent days.
“In the interest of limiting risk to our business and our customers, we have introduced several restrictions on some trades in $ GME, $ AMC and other securities,” a TD Ameritrade spokeswoman told MarketWatch, referring to the ticker symbols of the companies .
“We have made these decisions out of an abundance of caution amid unprecedented market conditions and other factors,” she said.
Charles Schwab, who bought TD Ameritrade but still operates as an independent retail brokerage platform, said it has tightened margin requirements in some of those trading names, including GameStop.
A Schwab spokeswoman said the platform changed its margin requirements, or how much an investor can borrow, on Jan. 13, saying it has “imposed restrictions on certain transactions in GME and other securities.”
The restrictive measures come as the shares of video game retailer GameStock rose 1,600% in January as traders gathered in online chat forums to make big bets on the stock using options, often out-of-the-money calls that wages only if the stock increases in value over a period of time.
Traders on sites like Reddit’s WallStreetBets, and who use trading platforms like Robinhood, have clashed with hedge fund investors, sparking a battle between prominent Wall Street short sellers and individual investors in GameStop stock.
A Robinhood spokeswoman said officials of the popular trading platform “are constantly monitoring the markets and adjusting as we see fit for the benefit of our clients.”
Robinhood said it has also raised the requirements for GME and AMC to 100%, highlighting that Robinhood does not allow stocks to go short or clients to trade naked options.
However, the recent run-up to GameStop has spread to other parts of the market, with shares of companies like AMC Entertainment also rising in price on Wednesday, along with shares of Bed Bath & Beyond BBBY,
and retailer Express Inc. EXPR,
whose shares were up 250%.
Read: It’s not just GameStop: here are some of the other heavily shorted stocks that shoot higher
Recent volatile trading has even troubled some on Wall Street, with concerns about a bubble. The Dow Jones Industrial Average DJIA,
the S&P 500 index SPX,
and the Nasdaq Composite Index COMP,
all traded lower on Wednesday.
Regulators are aware of the recent move, with William Galvin, the Secretary of the Commonwealth of Massachusetts, telling Barron in an exclusive statement on Tuesday that he was watching the move.
“This is definitely on my radar,” Galvin said. “I’m concerned because it suggests that there is something systematically wrong with options trading on this stock.”