Extreme volatility in stocks such as GameStop Corp. and AMC Entertainment Holdings Inc. “generated significant risk” for brokers by imposing stricter requirements on the firms, said Wall Street clearinghouse DTCC.
“When volatility increases, so do the portfolio’s margin requirements,” said the Depositary Trust & Clearing Corp. Thursday in a statement by email.
Wild trade this week was driven by traders from a Reddit forum, who joined forces to drive up stocks of several highly short-short stocks, causing billions of dollars in losses for hedge funds.
Companies including Robinhood Markets, Morgan Stanley’s E * Trade and Interactive Brokers Group Inc. was among those restricting trade in some of the names fueled by Reddit.
In a blog post, Robinhood linked its decision to impose the trade restrictions with the clearinghouse’s heightened demands.
“These requirements exist to protect investors and the markets and we take our responsibilities to meet them seriously, including through the steps we have taken today,” said Robinhood.